Good morning and welcome to the Office Depot's Fourth Quarter and Full year 2019 Earnings Conference Call. All lines will be on a listen-only mode for today's call, after which instructions will be given in order to ask a question. At the request of Office Depot, today's call is being recorded.

I would like to introduce Tim Perrott, Vice President Investor Relations. Mr. Perrott, you may now begin..

Good morning and thank you for joining us for Office Depot's fourth quarter 2019 earnings conference call. This is Tim Perrott and I'm here with Gerry Smith, our CEO. I am also joined by David Centrella, our Senior Vice President of Financial Planning and Analysis and Interim Finance Leader who will provide additional details on our financial results.

On today's call, Gerry will provide an update on the business including highlights of some noteworthy achievements for the year and progress toward our transformation. David will then review the Company's results for Q4 and full year including our divisional performance.

Following David's comments, Gerry will have some closing remarks and then we'll open up the call 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 forward-looking statements reflect the Company's current expectations concerning future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially. A detailed discussion of these factors and uncertainties is contained in the Company's filings with the U.S.

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 presentation slides that accompany today's comments and reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measure are all available on our website at investor.officedepot.com.

Today's call and slide presentation is being simulcast on our website and will be archived there for at least one year. I'll now turn the call over to Office Depot's CEO, Gerry Smith.

Gerry?.

Thank you, Tim, and good morning to everyone joining our call today. It's great to be here with you this morning to discuss our accomplishments for the fourth quarter and full year 2019 and our outlook for the year ahead.

We made significant progress throughout the year on our transformation, improving our platform for profitable growth, and extending our position as a leading integrated B2B provider of business, products and services.

Since 2017, we embarked a multiyear transformation strategy rooted in strengthening our B2B business, developing more predictable revenue streams, and leveraging our assets to drive long-term profitable growth. Our primary focus in 2019 was to further improve our operating structure and enhance our competitive agility.

And as evidenced by our results, we made tremendous progress. For the year, we improved our profitability, expanded our value proposition and leveraged key assets to enhance our B2B platform. As shown on Slide 4, I would like to highlight the primary drivers in the year supporting our goals.

First, through a solid execution of our Business Acceleration Program, we streamlined our operations and made sustainable improvements to our business model. As a result, we exceeded our operational goals for the year.

As a reminder, our Business Acceleration Program or BAP as we refer to it, is a multiyear effort designed to create a more competitive enterprise, driving cost efficiencies that provide additional sources of capital to improve customer satisfaction and importantly fuel future growth.

This program exceeded even our own ambitious goals for the year, delivering significant cost savings and driving improved operating performance. Profitability was up year-over-year in each of our divisions, after implementing this program, resulted in a 2% increase in adjusted operating income for the year and 10% for the quarter.

We will continue to drive this program and the benefits to make additional growth investments in the year ahead. Second, we continue to make enhancements to our integrated B2B platform to generate future profitable growth.

Our B2B businesses, which include our BSD and CompuCom divisions, generate approximately 60% of our total revenue and well over half of our operating income. Under our new leadership in both divisions, we took several actions to build a stronger more profitable pipeline for future growth.

We refined our value proposition, improved our sales operations in quality, and refocused our strategy at CompuCom. These efforts combined along with the BAP resulted in significant improvements in profitability and positions us to compete more effectively going forward.

Next, we continued to gain traction outside of our traditional office product offerings generating growth in adjacent categories like Cleaning & Breakroom and Copy & Print services.

Our adjacency categories are over a third of our sales in our BSD division, and we're only at the beginning stages as these adjacency categories represent large and growing revenue opportunities.

We grew service revenues during the year in both our BSD and Retail divisions, which were up 8% and 6% respectfully and improve the efficiency of our supply chain and for new partnerships.

Finally, we strengthened our balance sheet, generate a strong cash flow and remains shareholder focused with our continued balanced capital allocation focus, we paid down debt, we return cash to shareholders in the form of dividends and share buybacks invested in high value areas this is supply chain distribution and customer operations.

Strengthening our balance sheet even further in 2020, we are happy to announce that we completed the final maturity of the Timber note receivable results in a net cash of approximately $88 million received in the first quarter.

We remain in a position of strength with approximately $1.7 billion in total available liquidity when considering the cash received from the Timber note receivable. Our performance for the year was punctuated by our strong performance in the fourth quarter as shown on Slide 5.

We drove strong results in the fourth quarter, as targeted actions to improve profitability resulted in significant increases in operating income. However, as we've mentioned on previous calls, some of these actions have had an adverse near term impact to revenue.

These actions along with lower sales or retail division with fewer stores and service impacted revenue, which was down in a year end quarter, 3% and 6% respectively.

That said, we believe that these actions are necessary to improve our operations and to enhance our low cost delivery model designed to drive future growth in our BSD and CompuCom divisions. Our operational results were terrific.

We generated $156 million in adjusted EBITDA, a 13% increase or the same period last year and adjusted the operating income of $92 million, a 10% increase over the prior year. We generated $135 million in adjusted free cash flow in the quarter and beat last year's earnings per share by $0.03.

Continued strong performance of our Business Acceleration Program, supply chain efficiencies and deliberate actions, we have taken to improve profitability drove these strong results.

We continue to make progress on our transformation in the quarter enhancing our B2B platform, dragging increases in service revenues and gaining traction certain adjacency categories. Services revenue was up 14% in BSD and total service revenue remained at 16% of our consolidated revenue in the fourth quarter.

We are continuing to focus on growing our services business, and with CompuCom refocus strategy, we expect to achieve higher levels of growth and service revenue in the future. We grew certain adjacency categories in the quarter, including our Cleaning & Breakroom and Copy & Print adjacency categories.

The investments we've made in our supply chain, the backbone of our business continued to deliver with the highest productivity and customer satisfaction metrics on record for our company. We also entered into new innovative partnerships with companies such as Shipt.

Shipt as the member based delivery marketplace that offers personal shopping and same-day delivery services through our partnership, Shipt members and more than 200 markets serving over 60 million households has the ability to source products from Office Depot on a same day delivery basis.

We are in the early stages of this opportunity, but we are very encouraged by the progress we've made thus far. And lastly, our approach to capital allocation remained balanced and we returned value to shareholders through dividends, paying down debt and buying back $29 million of our stock. Moving to Slide 6.

Let me turn our attention to highlights within our business segments beginning with our BSD division.

Our Business Solutions Division, the largest component of our B2B platform serving about 10 million business customers, including 200,000 enterprise customers and about half the Fortune 500, drove improvements in operating performance throughout the year.

Under new leadership, BSD's primary focus for the year was centered on improving profitability and built a stronger platform for future growth. Target actions to improve the quality of the sales efforts and to enhance operational efficiency drove significant increases in our operating performance.

As evidence of our progress, operating income was up an impressive 28% in the fourth quarter versus the prior year, and up 12% for the year. Revenue was flat year-over-year and down 3% in the fourth quarter, largely due to the targeted actions taken to improve operating margins and reduced unprofitable sales activities.

While these actions had a near-term adverse impact our revenue, we believe it's the right approach to prepare our platform to drive profitable growth in the future. Revenue also includes results from our stated strategy of acquiring leading players in previously underserved localized markets.

These small acquisitions have allowed for an accretive means to grow our business customer base, expand our distribution presence and grill our offering beyond traditional office supplies. We had completed an integrated five lease acquisitions throughout the year and all are performing well.

One of our long-term strategies for growth is expanding our product offerings beyond traditional office supplies or what we're referred to as adjacencies. These adjacency categories accounted for 37% of total BSD sales in a quarter. Adjacency categories include a Cleaning & Breakroom, Copy & Print, furniture and technology products.

Cleaning & Breakroom was a standout among these categories of over 8% of the year. This category alone represents nearly 40% of our total adjacency revenue. As this category is a $26 billion growing industry, we're still in the very early stages of capitalizing on this attractive growth opportunity.

Additionally, our Copy & Print business grew throughout the year up 6%, and now represents over a $0.5 billion in revenue in both BSD and retail and is growing on an annual basis. Overall, BSD delivered exceptional operating results in 2019 and now it's time to grow the top line.

In the coming year with a stronger platform and improved processes, we're investing to derive the next phase or revenue growth in BSD. I'd like to take a moment to discuss these drivers. Using a targeted growth approach, our team has established new rigor and discipline, improving sales efficiency and repositioning our value proposition.

We are utilizing data analytics to better understand customer segmentation, allowing us to deploy our resources most effectively to increase sales in existing accounts and improve targeting of new customer accounts.

We will expand our distribution reach through high quality customer acquisitions and importantly continually expand share-of-wallet opportunities by driving adjacency sales growth and avail any new product category offerings.

There are several new in demand adjacency categories that we are evaluating in which we have a competitive advantage to serve, given our business relationships backed by our world-class supply chain. Additionally, we will continue to capture the numerous cross-selling opportunities between BSD and CompuCom.

Just as we did them over the past three years when we change the trajectory of BSDs from a business that was declining and into a growing and profitable business, our platform was deployed to drive the next phase of growth. We have already seen early signs of success. Our sales productivity is becoming stronger.

Our total pipeline of new business is increasing and our adjacency categories are growing. We are excited about the early progress as we execute our growth plan in 2020. I'd now like to take some time to discuss our progress with CompuCom starting on Slide 7.

CompuCom is an important part of our B2B business and a key asset for us in developing our services businesses. With a 32 year history, a blue-chip customer base, including half the top 10 fortune 500 companies and a brand name that stands for quality.

Their world-class offerings are large field force of highly trained technicians differentiate us from the competition and positions us for opportunities that we could not pursue without them.

Turning to Slide 8 CompuCom clearly had a very challenging start to the year in 2019 however, CompuCom has since made progress stabilizing his operations, driving higher operating income, increases pipeline and new business.

As part of this turnaround, we hired a new leader for the division, which is mixed flattery one would snippet and experience and a great vision and strategy. He and his team have refreshed CompuCom strategy and brought new energy to accelerate future profitable growth.

With the initial focus on improving profitability, CompuCom drove increases in your operating come throughout the year and build a pipeline of new business that we expect will drive higher revenue growth in late 2020 and beyond.

The investments we made and new technology actions we've taken to improve operations and strong execution of the BAP have resulted improving profitability. In the quarter CompuCom generated $9 million in operating income of 80% over the last year and one new business in excess of $300 million in total lifetime contract value.

Revenue was lower by 60% in the quarter compared to last year strong fourth quarter largely related to delivered actions taken to improve profitability as well as the timing of both product orders and project related work.

As you heard last quarter, CompuCom has refocused strategy, injecting new energy and taking full advantage of the Company's core strengths and capabilities.

At his core CompuCom is the organization that enables enterprise employees to be productive and it's refocused strategy of connecting people, technology and the edge in a seamless experience has it well-positioned to capture growth in a market that is large and growing.

We estimate the current addressable market for managed device workplace and infrastructure services in North America to be an excess of a $130 billion.

The industry is highly fragmented and despite our growth over 32 years, we've only captured a small portion leaving significant potential for growth and although would take some time to realize this growth and we have much more work to do, we believe that CompuCom now is on the right path.

I now like to spend a few minutes on our retail division performance and the initiatives underway to maximize value in this area of our business. We made good progress throughout the year optimizing our retail footprint and improving our operating performance, helping us offset some of the traffic challenges of industry spacing.

We worked throughout the year to improve our in store experience, incentivized our store managers and use the local approach to execute creative marketing and promotional strategies to improve performance. As a result, we've grow increases in key metrics, such as our conversion rates and sales per shopper.

Demand increased for our buy online-pick up in store offerings up over 8% for the year and services revenue grew 6% for the year as well. Largely driven by increases in demand for our Copy & Print and subscription based services.

These positive trends along with our client-centered selling culture and an increase in loyalty customers partially offset lower traffic trends in the quarter. Same-store sales were down about 4% for the quarter and for the year.

These positives taken together as strong as key share of our Business Acceleration Program hope to drive higher margins leading to a 21% increase in operating income in the fourth quarter, and a 1% increase for the year.

As I've mentioned in the past, we continually evaluate their profitability a strategic value of each of our retail locations, per share we optimize our footprint. We have been refining our retail footprint resulting in a higher number of store closures versus last year.

While this has had a negative impact for our sales contributing to the 6% decrease in revenue for the year, these actions are proving the vitality of our network and helping drive increases in profitability.

That said, our retail footprint continues to be a complimentary and an important component for overall distribution platform and a key differentiator versus online competitors. To that end, we continue to think about our retail space differently and are pursuing additional ways to drive value from our footprint, increase store traffic.

We have launched store within a store opportunities with companies like Lenovo and establish innovative services with partners like Telos ID, which positions us to deliver additional high value services targeted at business and consumers alike.

Going forward, we will continue to optimize our resell footprint to the benefit of our shareholders, reducing exposure and focusing on driving more efficiencies in our operations. Before I turn the call over to David for additional details on our financial results, I would like to discuss our focus for 2020 as shown on Slide 10.

As I've stated in the past, our progress today supports what I believe to be a very different business, and I think most perceived of Office Depot. As you've heard a few times today, we're a leading integrated B2B distribution company offering business, products and services.

We have a highly valuable asset base that includes one of the largest and most unique distribution supply chain networks in the country. Our transformation emphasizes B2B, reduces reliance on retail and positions us to offer a broader array of products and services. As we move forward in 2020, our focus will be on delivering top line growth.

Utilizing our B2B platform, we will invest to drive growth in our BSD and CompuCom divisions, take advantage of our expanded product and service offerings and continue to optimize our retail footprint to the benefit of our shareholders.

In support of these growth initiatives, we're adding selling resources, investing our delivery platform utilizing new intelligent tools and technology and leveraging our scale to reach more customers with a broader array of high quality business products and services.

Continued costing is derived from both the business deceleration program and our retail optimization efforts will help support these investments in our future growth.

Through our targeted growth plan in our BSD division, we will pursue growth through new customer wins, greater penetration of existing accounts and business customer acquisitions where attractive.

We'll continue to drive our adjacency product and service categories and evaluate new categories, which we have a competitive advantage to serve our customers. In addition to our high growth adjacency categories, we will continue to pursue additional opportunities that leverage our supply chain and unique ways.

Another key component of growth is CompuCom. As you heard, we made significant progress in stabilizing this business and growing as pipeline of new customers and we are very encouraged with our refocus strategy and new energy that takes advantage of CompuCom score strengths.

While this is still a work in progress, we have confidence that CompuCom is on the right path to generate profitable growth in 2020 and beyond. Underlying our growth objectives is our continued focus in driving a low cost sustainable business model.

We've made significant progress in the past year in creating a more efficient business model driven largely by our Business Acceleration Program.

We will continue to execute upon this program and use these benefits along with benefits generated from our retail optimization efforts to help fund our growth initiatives and we will remain committed to create long-term value for our shareholders.

We will continue our balanced approach to capital allocation, including opportunistic share purchases and make discipline investments in our B2B growth initiatives. Additionally, we will continue to evaluate our operational structure to look for means to unlock future value.

As an example of this effort, we anticipate completing our previously announced feasibility review of potential holding company reorganization by the end of the first quarter 2020. With that, I'll turn the call over to Dave for more detail on our financial results..

Thank you, Gerry, and good morning everyone. I'm happy to be here today to discuss with you our financial results for the fourth quarter and full year 2019. Consistent with previous quarters, we have provided our results on both a GAAP basis and adjusted basis from continuing operations.

My comments will primarily address the performance from our continuing operation on an adjusted basis. Total revenue of $2.5 billion in the fourth quarter was down 6% largely driven by lower sales in our retail and CompuCom divisions, as well as from targeted actions to reduce unprofitable sales activities to improve profitability.

GAAP operating income in the quarter was $74 million, up from $24 million last year. Included in operating income was $11 million in merger and restructuring charges, $3 million of which is associated with our Business Acceleration Program.

We also recognized $6 million in asset impairments, mostly related to the change in accounting for the operating leases, right of use assets associated with retail store locations. Excluding these and other items, our adjusted operating income for the fourth quarter was $92 million up 10% from $84 million in the prior year.

Unallocated corporate expenses were $19 million in the quarter compared to $3 million in the prior year. Reflecting higher incentive expenses associated with our overall performance in 2019 partially offset by savings associated with our Business Acceleration Program.

Adjusted EBITDA was $156 million for the quarter, up 13% compared to $138 million in the prior year. This includes depreciation and amortization expense of $50 million in the fourth quarter of 2019 and 2018 respectively.

Excluding the after tax impact from the items mentioned earlier, adjusted net income from continuing operations for the fourth quarter of 2019 was $68 million, or $0.12 per share compared to $52 million, $0.09 per share in the prior year an increase of $0.03 per share.

For the fourth quarter cash generated by operating activities was $152 million, which included $10 million of cash expenditures related to the Business Acceleration Program. Capital expenditures in the quarter were $27 million compared to $66 million in the prior year reflecting lower investments in our retail operations.

While continuing investments in our services platform, distribution network and e-commerce capabilities. Reported free cash flow was $125 million, adjusting for $10 million in cash expenditures related to the Business Acceleration Program, adjusted free cash flow in the quarter was $135 million.

Turning to Slide 13, we have highlighted some key performance measures for the full year of 2019. For the year, we generated higher adjusted operating income, made investments in our platform for future growth, generated significant free cash flow, paid down debt and return capital to shareholders.

Total company sales for the year totaled $10.6 billion, a 3% decrease compared to the prior year. The decrease was primarily due to lower sales in our retail division related to lower comp sales and 54 fewer stores and service.

And lower sales in our CompuCom division, largely related to targeted actions to reduce unprofitable sales activities and lower project related sales. Underlying our sales trends, service-based revenue grew across our business with BSD and retail generating an 8% and 6% growth in the year respectively.

Full year GAAP operating income was $191 million, down from $254 million last year. Primary drivers of the decrease are a $44 million increase in merger and restructuring charges, largely associated with the BAP, and a $49 million increase in asset impairment charges, mostly associated with the change in accounting for operating leases ROU assets.

Excluding these and other items, our adjusted operating income for 2019 was $367 million exceeding our guidance for the year and an increase of 2% over the prior year. Adjusted EBITDA was $590 million for the year, a 4% increase compared to $567 million in the prior year.

Excluding the after tax impact from items mentioned earlier, 2019 adjusted net income from continuing operations was $228 million, or $0.41 per share compared to $199 million or $0.35 per share in the prior year, an increase the $0.06 per share.

Finally for the year, cash provided by operating activities of continuing operations was $366 million with adjusted free cash flow of $310 million meeting our goals for the year. Let's now turn to Slide 14, which highlights the performance of our BSD division.

As a reminder, BSD is the largest component of our B2B integrated distribution business, servicing customers from the Fortune 500 to small-and medium-sized businesses. Reported sales for the fourth quarter for BSD were $1.26 billion, a decrease of 3% compared to the prior period.

The year-over-year comparisons reflect the impact of targeted actions to reduce unprofitable sales and our contract and e-commerce channels. As Gerry mentioned earlier, these actions had a temporary negative impact to revenue. However, we believe they are necessary to strengthen our platform and improve our position to generate future growth.

These actions were partially mitigated by the positive impact of acquisitions and growth in certain adjacency category. Adjacencies sales represent 37% of our total BSD revenue. The BSD division reported operating income of $69 million in the fourth quarter up 28% compared to the prior period representing 130 basis point improvements in margin.

The increase versus the prior year was driven by a combination of lower SG&A from cost efficiencies associated with the BAP, more efficient distribution costs and other actions to improve profitability.

Looking at Slide 15, we highlight the performance of the CompuCom division in general while revenue was down compared to a very strong fourth quarter last year, CompuCom operating results have continued to recover from the slow start at the beginning of the year.

Sales for the fourth quarter for CompuCom were $237 million down 16% versus the prior year period. The decrease was due in part to lower product sales occurring in the quarter and a delivered effort to reduce or eliminate certain unprofitable sales and support activities to improve profitability.

The CompuCom division reported operating income of $9 million in the fourth quarter of 2019 compared to operating income of $5 million in the prior year period. BAP cost efficiency measures and other cost reduction efforts help to drive the year-over-year increase.

As Gerry addressed earlier, we continue to take actions to improve further operating performance including implementing our refocus strategy, increasing use of automation to further improve service efficiencies, simplifying our operational structure and aligning sales efforts to better serve customers and accelerate cross selling opportunities.

Turning to Slide 16, reported total sales in the quarter for our retail division declined 7% to $1 billion. The decline in sales was largely related to the impact of store closures over the past 12 months as we had 54 fewer stores compared to a year ago as well as the lower store traffic and volume.

These impacts were partially offset by increases in conversion rates, average sales per customer and increases in loyalty program membership. Same-store sales declined about 4% representing a slight improvement as compared to the same period last year.

The retail division reported operating income of $34 million in the fourth quarter, up 21% over the same period last year. As a percentage of sales, this represents an 80 basis point improvement in margins.

The increase in operating income first prior year reflects higher gross margin, lower SG&A from cost efficiency initiative and an improvement in distribution and inventory management costs. Turning to the balance sheet and cash flow highlights on Slide 17.

We ended the quarter with total liquidity of over $1.6 billion consisting of $698 million in cash and cash equivalent and $920 million of availability under the asset-based lending facility. Total debt at the end of the quarter was approximately $681 million, resulting in a positive net cash position.

Total debt at the end of the quarter excludes $735 million in non-recourse debt, supported by the Timber notes receivable.

As we announced subsequent to quarter end, the non-recourse debt and the $818 million Timber notes receivable reached maturity, resulting in a net cash payment to the Company of approximately $88 million, including about $5 million in accrued interest income.

Taxes on this transaction are expected to be negligible based on the utilization of existing tax assets. The positive cash impact, including the elimination of the non-recourse debt and Timber note receivable are not reflected in our year-end financial results.

Moving into cash flow, for the fourth quarter, cash provided by operating activities was $152 million, which included $11 million in restructuring costs and $4 million in acquisition and integration related costs. This compares to cash provided by operating activities of $61 million in the fourth quarter of the prior year.

Capital expenditures in the quarter were $27 million versus $66 million in the prior year, reflecting lower investment in retail operations while continuing investments in our service platform distribution network and e-commerce capabilities. The cash charges associated with our Business Acceleration Program in the quarter were $10 million.

Accordingly, adjusted free cash flow from continuing operations was $135 million in the fourth quarter 2019. On Slide 18, we highlight our continued balanced approach to capital allocation.

Our priorities were focused on investing in our business, including our Business Acceleration Program, servicing dividends, expanding our distribution network, paying down debt, and selectively executing share buy backs. During the year, we generated $366 million in operating cash flow.

After considering the $150 million in capital investments to further strengthen our B2B platform, as well as significant cash investments in our Business Acceleration Program, we paid $55 million in dividends, paid down $98 million of debt and invested $27 million in high quality acquisitions.

We also bought back $40 million of our shares, which leaves us approximately $160 million available on our current share buyback authorization. We anticipate continuing to take a balanced approach to capital allocation.

We recognize that our strong liquidity position gives us significant flexibility, including evaluating additional means in which to address the burden of the term loan. Overall, we delivered strong operating results in the quarter and year, and our team remains committed to creating value for our shareholders and building upon our B2B platform.

With that, I'll now turn the call back over to Gerry to discuss our 2020 guidance and closing remarks..

Thank you. As you heard, we've made excellent progress throughout the year, improving our operational performance and enhancing our position as a leading integrated B2B provider of business products and services.

In 2020, our focus will be on investing to drive top line growth in our BSD and CompuCom divisions, leveraging our low cost business model and continuing to rationalize our retail footprint. Our 2020 guidance is as follows. We expect sales of approximately $10.5 billion. We expect to generate approximately $550 million of adjusted EBITDA.

We expect to deliver approximately $350 million in adjusted operating income and expect to drive approximately $300 million in adjusted free cash flow. This guidance reflects positive sales trends in both our BSD and CompuCom divisions offset by impacts from store closures as we continue to optimize our retail footprint.

It also considers additional growth investments fueled by the continued execution of our Business Acceleration Program. This guidance also assumes a stable global source environment without significant disruptions from factors such as the coronavirus outbreak or significant changes in the tariff structure.

I will now turn the call back over to the operator. We can take your questions..

[Operator Instruction] Our first question comes from the line of Liz Suzuki. Please state your company name then proceed with your question..

Hi, this is Jason Haas form Bank of America on for Liz. Thanks for taking our question. So first one is just more of a housekeeping question.

Could you say what BSD revenue growth was in fourth quarter on an organic basis, so excluding the benefit of any acquisitions?.

Hey, Jason, this is David. So, I would assume that about 1% of the growth was attributed to our acquisitions..

Got it. Thank you. And then for the go-forward guidance, so I know you said, you're expecting top line growth and BSD and CompuCom. Could you talk about what sort of cadence you're expecting there and then what the drivers will be? And then, is there any-- are there any future acquisitions baked into that guidance? Thanks..

Yes. Jason, from a go forward perspective, I'll break it up into two categories. Number one is, we believe that with the operational costs and premise we made throughout this last year, we're have -- we have the ability now to reinvest in growth.

I think from a cadence perspective, what we're looking for is, the ability to target better our customers, we have a strategy in place in CompuCom now, we have a new targeted growth system from our B2B businesses.

And so, we think that with the better cost basis we have, the new sales processes and strategies we have in both of these units and our two new leaders in both those units, we're confident that we have the ability to grow, and we're going to invest some of the operating income as well as the retail optimization into the growth of the business as well..

Great. Thanks. And then for follow-up, just maybe on the profitability side, so some nice profit --profitability improvement in 4Q. It seems like the guidance doesn't make -- assume the same rate of profitability, growth just in terms of like the year-over-year operating margins for the business lines in 2020.

But maybe you could just speak to kind of what's implied for the guidance by division? That'd be helpful. Thanks..

We don't break out by division profitability, but what I will say is, we're confident in these numbers. I will say we're taking some of these, a lot of investments of what we created from BAP and we're invested back into growing the B2B as well as the CompuCom businesses. We're confident, we're going to -- we have the ability to go off and go do.

I think Q4 demonstrated the value of our BAP program and our retail optimization. I think we were quite happy that we over achieved our targets for Q4 and the run rates, and we hit our run rates for the year and going into 2020.

But it's all about growth and it's all about making sure, we're taking a BAP and putting that into growing the business as well as our operating profit as well..

Understand. Thanks. And then, if I could just add one more question.

Could you discuss how integrated each of the three business segments are with each other?.

Obviously, the teams interact and work on joint activities of customers, but from a segment reporting perspective, obviously you have your retail business and you have your BSD, they're online as well as our B2B contract sales business and CompuCom.

They all operate from a go-to-market perspective independently, but we do cross-sell across all our channels of distribution. Our mission is to be a trusted platform for B2B products and services.

When we're selling those B2B customers, we want to sell through our sales team, we want to sell to our inside sales team, we want to sell through our retail footprint, we want to sell through our online platform, as well as through mixed CompuCom sellers as well. So, we think all our channels are important.

All are focused on creating a B2B marketplace platform to sell products and services. They're secured customers. IRA will be better business long-term for this business..

Our next question comes from the line of Michael Lasser. Please say your company name then proceed with your question..

Good morning. It's Mark Carden on from Michael Lasser this morning. Company is UBS. Thanks a lot for taking the questions. So your retail comp remains steady throughout the year down 4%.

Is this sort of right run rate for the business going forward? Do you guys ultimately see a sustainable level of sales per store that you can share with us? And can the stores become profitable at that level? Thanks..

Well, I think from a -- we've done a lot to -- Kevin Moffitt and his team done an outstanding job of optimizing the footprint.

If you look at our profitability, on a year-over-year basis on a lower sales -- from a year-over-year perspective, we actually were up a couple of million dollars from a year-over-year perspective, which I think is testimony to great leadership and our work on really focusing on conversion. We also focus on all of the additional services.

Services are up roughly 6% to 8%, depending on the services. And so, our whole focus is finding the optimized footprint in retail, and we're going to continue to try to drive profitability improvement across the chain..

Great.

And on that sort of footprint rationalization, how many more store closures do you believe you need to pursue in order to get there?.

Well, I think, from a store closing perspective, we're going to close slightly more stores in 2020 than we did in 2019 and continue to focus on optimizing, the footprint and continue looking at ways to drive traffic, drive conversion and with Telos ID is the successful partnership, it has been a successful partner.

We're always looking for new opportunities to drive execution of strategy. But I want to emphasize that the store footprint is important. We have 6 billion customers within 3 or 4 square mile radius of our stores. And so, we're going to target those B2B customers.

We started using local marketing programs, and the second half of the year, and we're going to continue to do that to grow our B2B customer base..

Great. That's really helpful. And then just one more, more broadly, given some of the 4Q sales declines with both BSD and CompuCom.

What gives you confidence that you'll be able to accomplish the top line growth that you're expecting without sacrificing profitability?.

Well, I think four things. Number one is, we went out and looked at some of these as the unprofitable business that we had and we rectify that situation. Number two is, I've got two great new leaders in the business and that makes a difference. Number three is, both have defined and refined new strategies that how we go to market.

Nick has done a great job of simplifying the offering and giving it very clear and concise vision together. And now you saw some of those results in Q3 and Q4 and I love the trajectory.

Stephen has done a really good job of really focusing on our sales as a science, and really getting our sales team engaged and energized on a systematic way of going to market. We've done some segmentation work as well, and we're very encouraged by what that segmentation work tells us. And so lastly, we're investing.

And so, if you go back to 2017, 2018, we were strengthened the core of the business. We got our hour cash generation vehicle. You saw our net cash position, which I'm really proud of. Last year, it was really getting our cost structure in place and we're going to continue to drive it a low cost model.

This year now as we have those two engines in place, we're going to drive growth across the business, and we're committed to go make that happen..

That concludes the Q&A session for today. I will now turn the call back over to Office Depot's CEO, Gerry Smith for any closing remarks..

Thank you all for joining us on the call today. We appreciate your time and support to be on the call, and we look forward to speaking with you again in the next quarter. Have a great morning and thank you very much..

Thank you for your participation. This concludes today's call. You may now disconnect..