The ODP Corporation (ODP) Earnings Call Transcript & Summary

All right. Well, great. Well, thank you so much. For those of you who are able to make it to the meeting today, I really appreciate that. I know it's always a big effort of moving around the city on somewhat of a cloudier day, although it looks like it's getting a little a little cleaner there. But I want to thank everybody for coming to our Varis-focused investor event today. Not only do we have the people here. We have to be aware that we have many dialing in a lot more dialing in on the webcast, I think, than perhaps we even anticipated. So this is great. Really appreciate everybody being here today. The meeting for today, we wanted to keep it really focused on Varis. You're going to hear a lot about both the overall [ Varis ] business model. You're going to hear about the market fit, and a lot of exciting things for this as well as a great demonstration of the platform itself. So really looking forward to that. I just would like to remind everybody, as we always do, the safe harbor language, which I won't obviously do a slide during with this, but always be aware of the safe harbor language, and that applies to this meeting as well. And with that, what I'm going to do is I'm going to turn it over to Gerry Smith, our CEO, who's going to make some opening comments; and Anthony Scaglione, our CFO, as well. Gerry?

All right. Thanks, Tim. So again, good afternoon, everyone. Thanks for joining. Make sure I stand at the right place here. Hey, I wanted to do a quick update. Again, thank you for being present today. Last couple of days, we came out with the earnings. Really pleased with the fact that, remember at Investor Day, we made commitments, and we [ busted ] up on stage and said we're going to hit those commitments through a lot of hard work, a lot of faith in our strategy. We did that, and we delivered it. I think you saw our commitment to a $1 billion share buyback. We've leaned into that aggressively coming out of the gate. One of my board members is here. Thank you for joining, Marcus. But I think it's been -- our Board is very committed to continue that path in that $1 billion. I think we did a great job from our low-cost model. We talked about $500 million in savings over the last 5 years. But our operational excellence, our ability to hit the quarter and the year in these difficult times, I think, demonstrates that we're extremely focused on our 3-horizon strategy, which we unveiled at Investor Day. The first horizon, if you remember, is our B2C business. That's our cash engine, and we're continuing to focus on that. We did a really good job of managing inventory last year. We'll continue to do that. We want to make sure we always have that cash engine to continue to fuel our share buyback focus, our capital allocation. The second horizon is our B2B business. Really pleased with the progress we made in that business, almost doubled operating income for the year. We see continued growth in that business going forward. So more adjacency growth across that business. But again, across these 3 horizons, we think right now as a company, we're being valued still as a retailer because as we move -- as retail moves, we move pretty proportionally with that, except for the last couple of days. But I think the reality is we think there's a different valuation multiple on the B2B business. And then what we're here to talk about the days of the third horizon. There's 2 different horizons. There are 2 different businesses. There's our Varis supply chain business. Later in the year, we'll set something up like this very similar or maybe even at a distribution center. Probably do it in the winter in South Florida. We may be pull some of your guys down there for -- if you want to get out of the cold. And then obviously, today is about Varis. I'm super excited about Varis. I give a little bit of background. I spent 10 years running the operations, Lenovo, the largest PC company in the world, about $50 billion in spend. I spent a lot of time in procurement. I spend 13 years at Dell in a variety of development as well as procurement roles. So really know this space well. Prentis and I met about 3 -- roughly 3 years ago, and he has a background obviously at another company that built a similar platform but also he was a CPO at Honeywell. So we see this as a category creation area. There was always a need -- there's a real need as operational supply chain backgrounds that say, "You need a contract-to-contract relationship." People want to know who their buyers and sellers. They want a 2-sided private platform. And we've gone off with the Board of support within our historical CapEx model, very important to say that. But we've built the platform. We recently launched it, and we're seeing a tremendous amount of progress to date. Today is to explain that in more detail. And I couldn't be happier for all of you to be here because I really think the third horizon, which we're not getting any value for today, fairly, but in the future, we think there's a lot of value creation opportunity. Some of you've called it a call option. I think that's a great way of saying that because we think our first and second horizons are executing well right now. We think we still have a lot of value creation within those horizons. But this is an opportunity to really talk about significant upside from the value for the business over time. So we'll go through the presentation. There'll be a Q&A. And again, Anthony and I will be here afterwards for Q&A as well as Prentis and the team. Anthony?

I'll just say a couple of words. Thanks, Gerry. Super excited about being here as well. Over the last year, as Gerry and I met with investors, we really had 3 main questions: what, why and how. What is Varis? Why ODP? And how we're going to measure Varis? And how we're going to measure the progress of Varis within ODP over time? So if we do a good job today, we should have those questions that much more answered. So super excited to get started. And with that, I'll introduce Prentis Wilson, our President of Varis.

Thank you. Awesome. It's great to be here. I think we've been working on Varis for a while, and I think we're far enough along to be able to start to share a lot more of the details of what we're doing. And I can't just say how excited we are about the progress we've made and where we're at. Let me start by saying, when you look at Varis, we're really focused on transforming the whole procurement ecosystem for both buyers and suppliers. It sounds pretty lofty. But we've been in this procurement space for a long time. I've been, as Gerry mentioned, I've run procurement organizations, very large complicated sourcing and procurement organizations and have been disrupting sort of the B2B procurement world for a while. There's been a lot of technology and a lot of investment in technology that started to improve the commerce across the board. But a lot of that hasn't really trickled into the B2B space, at least not all segments of the B2B space the way that it should, and there's a huge opportunity out there and a lot of demand really from both buyers and suppliers to sort of rethink this space. And that's what Varis is all about. Now pretty daunting task. But to do that, you need to have the right team. And I couldn't be more proud of the team that we've assembled here to build this platform at Varis. So again, my background, long time in the sourcing supply chain procurement world, but also spent close to a decade at Amazon building a B2B platform there. As you go through the leadership team, Daniel Smith, who's here with us today, and you'll hear from him. He is our Chief Customer Officer. He's led large portions of the B2B effort sort of go-to-market and [ biz dev ] effort for me at Amazon, but also deep and rich background in the B2B space. Terry Leeper is our Chief Technology Officer. He and I sort of crafted and built the B2B platform at Amazon together. He's a long-time technology expert, deep roots both in Microsoft as well as Amazon building large scalable technology platforms. [indiscernible] runs product for us. I couldn't be more excited for her to be on the team leading product. She has deep technical expertise, but also a really strong business acumen, makes it a great fit for product. She actually -- when at Amazon -- for Amazon business, she helped lead the product effort for international. So she read -- she led all the effort in terms of program and product management as we scale the business internationally. And [ Jason Fraser ] is here with us today. So he'll join us for Q&A. He runs finance for Varis. He was the finance leader for me for the first $10 billion at Amazon, but also just a fantastic finance leader. He's held big finance roles and lots of different complicated tech spaces, both at Snap as well as Amazon. Super excited to have him on the team here. Anne Rung is also on our team. Anne runs public sector for us. Tremendous opportunity we see in the public sector space. And Anne has a rich background there. She was the Chief Acquisition Officer on the Obama administration. Completely connected. Understands the complexities and the intricacies of the public sector procurement space, better probably than I believe anyone on the planet. I couldn't be more thrilled to have her on the team. And Stephanie Weeks is also joining us. She'll join us remotely. She's going to lead us through the demo. And Stephanie is just remarkable at customer experience and design. So she's going to walk us through a demo today. And so Stephanie Weeks, again, work with us at Amazon Business developed a lot of the look and feel and flow the customer experience, just how that whole world runs. She led that effort and designed the entire experience for us there. She's doing so here as well. But a rich history, a rich background in the B2B sort of space in terms of designing these user experiences and understanding the user experiences and getting them right. So incredible team. And I think a team that oftentimes, we like to say that we like -- we can finish each other's sentences, meaning this is a team that may be starting a new business, but we actually understand each other. We know how each player works, and we know exactly the role that we're playing, and we know the opportunity in front of us and how to go after it. So let's talk a bit about what we're doing. When you think about the world of B2B procurement. It's huge. And there's this whole world of sort of micro businesses that, frankly, they buy like consumers, they act like consumers, they'll go to stores, p-cards, et cetera. And you know what, they should. That's a great opportunity for them to go do that. On the large enterprise side, when you look at this space, this is where the world that I came out of and sort of when I was running procurement, where you have sophisticated procurement teams, you're managing large budgets, and you have very complicated enterprise systems. And oftentimes, these procurement teams are looking for complicated or complexity in terms of their procurement systems to manage that complexity. So how do I keep track of all the compliance? How do I keep track of procurement? And there's a world where they might invest in these big, complicated systems. It could cost hundreds of thousands of dollars or millions of dollars a year. You need people to maintain them. There's a need for that. And that's great for these big, super large, large enterprises. But when you look at the mid-market space, I mean this is a world where a lot of these companies are too big, the buy like consumers. They're not big enough to spend all this money on these big systems. They don't really have the resources to manage them. And frankly, these are companies, they come to work every day to sort of focus on meeting the needs of their customer and trying to focus on building their products and delivering their goods. And they just -- oftentimes, they're difficult for suppliers to reach. They're difficult -- it's difficult for a lot of these companies to drive the compliance and direct the purchasing where they need. And this is a whole sea of opportunity out there where these customers oftentimes, they're trying to find ways to manage purchases. And there's a lot of different point solutions out there that might help them with, say, spend management or might help them with purchasing controls in certain ways. But nothing really brings it all together that says a solution that just works. And that's really what the opportunity is and the space that we've sort of seen for a long time and know is an opportunity for us to go after, and that's really where Varis is heavily focused. So there is a better way. Again, if you put your shoes in these businesses where oftentimes, they want to direct purchases to the suppliers they want to go after. They want to be able to get controls but they just don't have the wherewithal to go do that. And they need the tools and systems, but some of those have been out of reach for a long, long time. And so bringing the right solution to bear is really what Varis is focused on doing. And it takes a complete solution. So as you walk through what we do at Varis is we actually bring the enterprise-grade procurement tools. So we're bringing the compliance, the tools, the visibility, the automation to these customers who haven't had it before. I mean, oftentimes, we'll talk to customers and they don't even really know how much money they spend. They don't even really have a good way -- they might negotiate a contract with a supplier, and they can't even really direct their purchases there. it's because they just don't have the controls to be able to do that. And these customers, when we spend time with them, they want help. I mean really what they want to do is they want to focus on their end customer. They want to focus on running their operations. They want to focus on producing their products. What -- they need help sort of getting the right suppliers, getting access to suppliers, really getting the right purchasing agreements in place. There's a huge opportunity out there to support them with that, which Varis does. And then the other -- the last thing is when you want to drive sort of great compliance, so you want to drive adoption, which is something you don't always see when you get these big complicated sort of enterprise tools to make it super simple. And this is where there's a lot of us we now -- it's just natural for us to buy everything. And our personal lives online is just super convenience. Well, it should be that convenient at work as well. And -- but you should be able to bring that convenience of the buying experience, coupled with the compliance just built right in with access to great suppliers that you can trust, sort of B2B grade suppliers that you can buy under SLA with the right level of contracts. And that's what Varis does. We bring that whole system together into one clean solution that just works for this particular customer segment. But I've talked about how simple it is. I talked about how easy it is. I think the best way to see that is actually to sort of watch the demo, which Stephanie is going to lead us through. So we'll let her walk you through the experience, and you can see what our customers work with today.

Thank you, Prentis. Hi, everyone. I'm Stephanie Weeks, and I'm just thrilled today to be able to share the Varis experience with you. And in my opinion, there's no better way to understand the value of Varis than to see it for our customers' eyes. So let me set the stage for you. I'm going to ask you today to imagine that you work at a mid-market manufacturing firm. Now perhaps you're a project manager and you're constantly juggling priorities. You're supporting many different teams, many plant locations. And today, like many other days you've experienced, someone comes to you with the need to make purchases for work. And though this is a common request, the way these things come to you varies given -- on any given day. It might be a phone call. It might be an e-mail. Or like today, someone who just comes over with some notes started in the notepad. So what do you learn today? Well, you learned that there's a floor manager who's going to be starting next week, and they're going to need a laptop. Oh, what kind? What precise kind of laptop. Oh, we're not sure. Okay, got to do some research. You also learned that there's an engine that wrote down on one of the smaller machines. And you've got to get that fixed right away, right, or some work might be delayed. So where do we get the replacement part? Not sure, going to have to do some research on that too. And of course, if we need to repair an engine, we're going to have a team do work, and we need to make sure they have the right safety gear. Wonder which type of care they need. More research. So it's not just about buying. You've got a lot to work to do just to figure out what to buy. You've got to figure it out one way or another. So you start with a search engine. You're literally just googling to try to figure this out. They're going to multiple different websites. You're trying to maybe find someone else in the, firm who might have purchased these things in the past. And you're really just trying your best. And to be really honest, even if there is some type of purchasing process or system in place, you either don't remember how to use it or you're avoiding it because it's too time consuming. So maybe you didn't make a trip to the local hardware store or in your bioelectronic store. The website you're visiting and the stores that you're shopping in, they might have the goods you're looking for. But even if they do, they're priced for consumers. So that's the best you can find right now, so you buy them and you expense it. That's the waste that we see happening every day without Varis. So it's clearly a waste of time for everyone who's involved. This is very likely a waste of money because these items you're buying are at consumer-based prices. And it's not that off of a contract with a supplier who could really serve this firm. And finally, it's just frustrating. It's frustrating for you to do all of this work. It's frustrating for the people who are waiting on these goods to be able to do their job. And it's frustrating potentially for the procurement professionals and suppliers who may have created a contract in the past, but you either didn't know about it or if you did, you didn't know how to make purchases from it. So like Prentis said, we think there's a better way. Varis experience is about changing that notion. First, I'm going to walk you through the Varis experience as an employee, and you'll get to see the consumer-like buying experience that folks like the person I just described would get to use. And I'll show you how Varis marry that with enterprise tools and the right set of suppliers that business leaders or folks like accounts payable really need to run and manage their entire set of direct spend for the business. So let me share with you. This is us. I'm logged in right now as an employee who makes purchases for work. So my Varis experience is oriented towards finding products. Varis comes preconfigured. So it comes with all of the goods and services I need for work but it's curated down to just the right set of items from the right suppliers based on my organization's policies. So just to be clear, this is not a hub or an intranet site that links out to lots of different e-commerce experiences that I have to then get and figure out. This is just one simple e-commerce experience. It enables employees to buy efficiently from every contract that my organization uses for indirect spend, but it feels simple and that's what I need. So let me show you a few examples. We mentioned that someone's going to need a new laptop for work, a new hire. So instead of guessing or shopping around, Varis makes it simple. I'll just type the laptop. This is all curated for me. So instead of getting a million results of laptops, I just get these 3 because these are the 3 laptops that my IT department supports. That's really important for an organization to function. So I can select this Dell. And just like you would experience on any other type of e-commerce environment, I can configure the drive processor, et cetera, with the laptop I need and add it to my cart. Now I mentioned that we're talking about a manufacturing firm. They may and probably have contracts with great suppliers for something like MRO, maintenance, repair and operations. But maybe not for IT. In this case, this organization use a Varis supplier for IT. Varis suppliers cover all the core categories that businesses need for indirect spending. And in many cases, as Prentis mentioned, mid-market organizations either sometimes don't have these contracts in place for some of these categories. Or they do, but their volume of spend is really low, so it's tough to have strong buying power. So procurement teams use Varis to save them time and leverage the suppliers we already have relationships with, and we create that connection for them. But what's critical and very important to understand here is that as the employee making this purchase, I'm blissfully unaware. I don't have to understand all of those great procurement decisions, I just use Varis and buy everything I need. Let's look at another example. We can talk about that engine that broke down, right? We need a replacement part. Again, Varis makes it simple. We'll type engine. I can see that it comes to 2-stroke engine here. This is the engine we use for our small machines. Now I just searched for a laptop, and remember that came from a Varis supplier. This time, I searched for an engine, and this engine happens to be provided by a supplier that we've had a contract with a great relationship with for years. But as the employee doing the search, there was no difference in the experience. I just searched and discovered what I needed. And keep in mind, this is not at all what businesses are used to. This might be what we're used to in shopping at home. But finding everything in one place, feeling confident that you know what to buy for work, knowing you're doing the right thing, buying from the right place, having something this simple is entirely new as an experience for work. Go back to the engine. So we look at this engine. And sometimes, we might need to buy a replacement engine. But in this case, we just need replacement parts. So I can look at a schematic that's provided by the supplier, who has a great relationship with all the manufacturers. And I can see that it's this retainer in here, #6. So let's just go down to #6 and add a dozen to cart. That was it. No referencing, big paper reference manuals. No calling the supplier or the manufacturer to try to verbally get at exactly which part it is that I need to order. No figuring out another website or even having to know who it's coming from. We are saving a ton of time here for this employee. But it's not just about the time. We're now also ensuring accuracy in purchasing, which is going to save even more time and more money down the line. So as we said, if there's going to be a team fixing this engine, they're going to need a set of supplies such as their safety gear. Safety gear is the kind of product that has to be reliably repurchased. We have to know that these products are going to work. Once again, Varis makes it simple. I'll just type safety, and my company has created a safety bundle. Now as a manufacturing firm, of course, we have a [ health ] safety and engineering department, who has selected, vetted and tested all of the safety equipment that we use for our employees. This ensures that they're OSHA-compliant and safe. Now the product selected by my organization in this bundle may come from different suppliers, some Varis suppliers or some not. But as an employee making this purchase, I'll describe what I need, the safety glasses, the vest and perhaps the hard hat, and I'll add it to my cart. I just used one website to do all of that. Super-fast. Very accurate. In this case, safe. And for me, there was very little mental load, it was just easy. In fact, it took me less time to buy this stuff than it did to explain all the payment happened in the past. So we have now selected products from multiple different categories, multiple types of contracts, multiple different suppliers and are all landing in one cart. I've saved a ton of time. This is very simple for me, and it feels familiar. This is easy. This is exactly the type of e-commerce experience that I'm used to when I'm buying anything for home. It should be this easy. So how do I proceed to check out? Varis now starts to really leverage those enterprise tools, who are managing indirect spend that I mentioned. Varis knows if I have enough funds in my allocated budget to buy these things. Varis knows which locations across all the plants we have that I'm allowed to send it to. Varis already knows how each of these suppliers expect to be invoiced -- expect to send invoices and expect to get paid. And it knows business policies from my organization, such as this approval chain. Now in this case, I have a 2-step approval process from my organization. This is up to the business. I might need this approval because of the total dollar amount in my cart, and that's an organizational approval or it could be because of the type of item I have on my cart. Maybe IT needs to approve something like a laptop. Businesses have their own set of policies, and Varis is flexible enough to support that. Again, though, as a buyer making this purchase, I'm saving time and I don't have to figure all that out because Varis has it set up for me. I just submit the request. Now what will happen next is Heather was the first person on that approval chain. So she'll get a notification, review it, choose to approve it or not, and it will continue down the process. Once it is approved, then purchase orders will automatically be generated and sent to each of the suppliers that were in my cart. This will happen automatically, and then everyone on the supplier side and the buyer side will be kept in the note. So as an example, as the employee who made this request, I can see everything from the request I made to the approvals as they move through my company. I'll be able to see the purchase orders that are generated for each of the suppliers that were in my request. And as fulfillment begins, the suppliers will send me their advanced ship notices, and I can even mark when I have received of that [indiscernible]. . So now we're really starting to do the work to support others in the organization as well, like accounts payable. So I'm actually going to switch my account now to someone else in the organization to show you how that works. I'm going to log in as Nancy Chile. Nancy is an accounts payable manager in my manufacturing company. Now when Nancy logs in, her environment looks very different in Varis because it's oriented around what's important to her, which is managing invoices. And because of how Nancy's organization works, our companies opted to give Nancy visibility into all of the purchases made by all of the employees in the organization, and this is important to her so that she can track down any information she might need to support payments. Importantly, Nancy has access to all the invoices. What's really great for Nancy here is that Varis contains all the information she needs. Varis knows what was originally requested, what was approved, what was in the purchase order for the supplier, what was shipped and what was received. With all of that tracking in Varis, invoices are verified and okay to pay automatically with no additional work for Nancy. Again, a huge timesaver. Varis handles everything from the request all the way through Okay to pay. And from here, Nancy can have all of these Okay-to-Pay files, transferred out to her accounts payable system of choice. And now she can get those suppliers paid on time, keeping their relationship strong. This is how our buying customers are using Varis today and really making procurement as easy as it should be. So when we think about that experience, we now understand the easy experience that our employees have to find what they need for work: saving time, improving accuracy, saving money. And the enterprise tools that our business leaders now have so they can really track, understand and manage all the spending for -- indirect spending across their organization. But that's not all for Varis. It's also about the suppliers. We consider our suppliers really the backbone of this incredibly simple buying experience, and Varis is driving traffic to the suppliers so they can build the durable relationships that they want with buyers. And that's what helps both buyers and suppliers grow. So with that, thank you so much for letting me share the Varis experience with you today. And now I'd like to hand it over to my colleague, Daniel Smith. He has some incredible stories to tell you about what we've been learning with our customers as they use Varis.

Thank you, Stephanie. It's so exciting every time I see our product. I'm so proud of what we've built. I'm Daniel Smith, I'm the Chief Customer Officer at Varis. And I think I have one of the best jobs at the company because I get to spend almost all of my time talking to our customers. And those customers, we consider our customers to be the suppliers that Stephanie just talked about, buying organizations and also our partners. And it's been an amazing journey over the last couple of years. We really started out a little over 2 years ago now, listening to our customers and understanding how they viewed the ability for us to begin to positively disrupt this entire procurement ecosystem. We also co-vision and codeveloped with them. We're building something not just for mid-market. We're building things with our mid-market customers. And so for the next year after that ideating, we built and we methodically and systematically rolled out new functionality and new capabilities, and we learned and continue to extend the value that we are providing to our buyers, suppliers and our partners. What's been the most, I think, encouraging to me over the last 12 months is really beginning to see the scale and to grow, and not just hearing from customers the value, but actually being able to see the fact that we're driving employee productivity, we're driving cost savings for buying organizations, and we are driving value for our suppliers. So let me give you a little window into that value we're creating using a specific example. I have a business relationship with a Chief Procurement Officer at a quick service restaurant franchise company. Thousands of locations, and they were super interested in Varis. We went through a process with them. And then right before we were about to start the rollout, I sat down with the CPO and said, "Let's define some success criteria. How are you going to measure what we're doing here at Varis successful in your organization?" He said 3 things: first, flexibility; second, reliability; and third, simplicity. And so after we rolled out the Varis platform and the restaurants had used it for a while, I sat back down and remember, this chief procurement officer is supporting thousands of locations across a couple of dozen states, hundreds of different cities and municipalities. It's a complex business. And I said, "Give us the scorecard. How did we do?" And he started with the procurement technology. And he said, "It's great that we have these enterprise controls. I didn't understand what was getting spent at my stores. Money was getting spent. I couldn't track it. We receive invoices for things. I had no idea what it was for. And so I needed the central control at a corporate level to understand where money was going." But he said, "I also needed, probably even more importantly, I need flexibility." And he described situations where imagine different stores and different cities, one store needs the ability to buy plastic bags to put stuff in to give to their customers. But another store in another city on over might not be able to give plastic bags because of the regulations in that city. And so they need in their purchasing experience when an employee logs on to the Varis platform, they don't -- they shouldn't see plastic bags, they should see paper bags. It's a simple thing. But in the operations of this company, that was really time consuming. So it gave us very high marks for flexibility. There are other examples of that flexibility. Some general managers might want to approve a purchase before it flows through. Other general managers of stores might want to give their employees autonomy. And we're flexible enough store-by-store, city by city to configure our system, but at the same time, have one solution that works across the entire system. High marks for flexibility. The second thing he talked about is reliability. So this retail -- sorry, this restaurant chain had trusted relationships with suppliers they've had for decades. They had custom-manufactured products. They had branded products. And that relationship was between this company and those suppliers, and they were reliable. They could trust them. Stuff was already always in stock. It was always high quality. It shipped fast to get there on time. And what this chief procurement officer told me is, "I need that for all the other stuff that I buy." And so we were able to bring relationships, suppliers to this company for everything from light bulbs to cleaning supplies to IT equipment like headsets that the employees would use when they're taking orders outside of the restaurant. And what he told us is that we were -- as the suppliers that we introduced to this company, that Varis introduced, were as reliable as the ones they had, had for decades. High marks for reliability. And the last thing he talked about was simplicity. And he described the situation in these stores, super fast-paced environments, not a lot of time. And every -- whenever someone needs to purchase something, they're taking their attention off of customers and running their restaurants and buying things. And so they needed simplicity in purchasing. But there's also really high turnover in this restaurant. He shared that over -- there's over 40% turnover in this organization constantly bringing in new employees. And so you can't have a system that requires a lot of training, a lot of time to ramp up. Just needed to work more quickly. So a higher mix for simplicity. So the flexibility of our purchasing technology, the reliability of our suppliers and the simplicity of our purchasing experience are really what drove value for that customer. It's really, really powerful to see that come to life. Let me zoom out a little bit now. And I want to talk about -- I just shared with you the value that a buying organization saw that it was really reflected in the product demo that you saw. But I want to zoom out now and talk a little bit about the value that we're driving for our other stakeholders, and this is really going to get to the crux of our business model at Varis. So we talked about the great purchasing technology. And historically, these really powerful systems that drive that control, understanding who's spending in my organization and how that money is being spent and where it's going, those have been out of reach of these mid-market customers. They need them. There are big enough organizations and have enough complexity and enough locations and enough divisions and employees that they need those controls, but that software has typically been out of reach. And so we offer enterprise-grade procurement technology that doesn't have enterprise-grade price tag. We keep that software in reach for those mid-market customers. And there's never been a greater need for that. Gartner, a research analyst firm, tells us that 65% of business buyers want to buy exclusively online or digitally. There's a couple of, perhaps, pretty obvious reasons for that. You've got consumers, we and our personal lives are buying nearly exclusively digitally and online and at Office Depot stores. We are buying -- we want to drive that simplicity. Now personally, we're bringing that into the work world. The pandemic has accelerated that trend. The problem is [ 4-store search ] tells us that only 17% of business transactions actually occur online right now. Think about that, 4 out of 5 of every dollar that's spent in this multitrillion-dollar industry happens in person, it happens over the phone. I didn't believe this, but until I saw with my own eyes, it occurs over fax machines, like that's actually still a thing. And so there's all this inefficiency in that system. So there's this huge gap right now between the way that business buyers want to purchase and the tools and systems that companies provide those mid-market -- the employees in those mid-market companies. That's the opportunity that we have right now. And so we attract buying organizations, and we bring retail companies and manufacturers and hospitality and schools and universities, we bring them to our platform by giving them this world-class procurement technology that's within reach. And this then really -- it becomes the crux of the value of Varis to our shareholders as well. Is this next stage? So conventional wisdom says that when a buying organization spends more, the that's when suppliers grow. It's pretty obvious, right? One of the supplier spends $1, and that's another $1 of revenue for that supplier. That's the conventional wisdom. What Varis says is that when buying customers save, that's when suppliers grow. And let me explain to you how that works. So we have all these mid-market customers on our platform, and we're introducing them to new suppliers. And when we do that, that supplier is spending less money on sales costs, less money on marketing costs. They have a lower cost to serve their employee. And those suppliers then will pass along the value that we've just created there in the form of lower prices to their customers. So they're actually sharing some of that value in the form of lower prices. They also then share some of that value we've created with Varis, and Varis captures some of that in the form of a revenue share, right? So we're taking a small percentage of every dollar that's transacted on our platform for the value that we're providing. And that's the magic of our business model, is that we succeed when our buyers save money and when our suppliers grow, and that's how we really turn this on its head. It's not a zero-sum game. Buy or save, suppliers grow, and Varis generates value. And then we really accelerate the value we provide with the partners that we use, and they're primarily technology partners as well as consultancies. So I want to now thread this through to a story of how this value chain comes together, and we'll start with American Freight. I'll introduce you here through the slide to Jonathan, who's the Vice President of store operations for American Freight. So he oversees the smooth operating of 360 stores, give or take a few, at this firm that sells mattresses, furniture and home appliances. And it's a big job, right? He needs to make sure that things just click and work in these stores. American Freight has 2 brand promises: one, it's a low price guarantee; and second, is a great customer service. And so in order to support those customer brand promises, American Freight has to have a cost structure and an operating structure that matches that. So the first thing I did, I actually had an opportunity to talk to a sales associate on the floor of the American Freight store. And this associate put it -- it's actually an assistant manager. He put it really, really well. He said, "Every minute that I'm spending, ordering something for the store, a hand truck, packing materials, cleaning supplies for the physical store. Every minute, I'm spending ordering that. I'm not spending a minute doing my real job, which is meeting with customers, guiding them to the right product, closing the sale and giving them great customer service." And he said, "When I use Varis, now I'm able to actually spend less time ordering and more time with my customers. So we're really driving that brand promise of customer service and customer intimacy." But then stepping back and talking with Jonathan, he's got to align the cost structure of American Freight to this, to support this low price guarantee, and so we were able to introduce American Freight to some of our suppliers that we brought to the table and drove significant cost savings for American Freight to help them advance that low-price guarantee model. So how do we save them money? Well, one of the ways that we did that was introducing them to Mitch. Mitch runs business development at a company called Buy Supply. And I'll note here that Varis prefers to work with suppliers that equally prize customer intimacy and economies of scale. And Buy Supply is such a beautiful example of this. The parent company of Buy Supply has been around for 41 years. It's a family-owned business. They had built up just a wonderful reputation for customer obsession and intimacy. Had 60,000 government agencies. And they said, "Look, we want to expand into the private sector." And that's how Buy Supply was born. So we partnered with Buy Supply to bring them all of these mid-market customers, customers that are spending hundreds of thousands, millions of dollars a year each with Buy Supply. And when we brought those customers to Mitch, Mitch, again, is spending less on sales, less on marketing, less cost to serve to these customers. And that's how we're saving Jonathan money. He can pass those savings on to Jonathan. So Jonathan in American Freight now are getting the same products they've always purchased at a significantly reduced cost for them. And so -- and Mitch obviously is gaining more customers. They're growing their customer base and they're doing it at a much lower customer acquisition cost than they could have otherwise. So huge value to the supplier. And we're providing huge value to a number of suppliers. One of them happens to be in our own family. It's ODP business Solutions. ODP Business Solutions, of course, is the -- one of our 4 BUs, business units, at ODP. And they enter into long-term contract relationships with public sector entities and businesses to sell business supplies. And one of their customers was a very well-known retail chain with a little over 2,000 stores. And they had a great relationship. They signed this long-term multi, multimillion dollar contract, and things were going great. This retail company was spending. Spending was kind of on track. Now there's a challenge in this kind of B2B contract world. And there's this kind of this old adage that you -- once you've won an account top down, that's when the selling really begins. You win a top down, but then you have to go sell bottoms up. Think about this. You've got to get all the stores and all the regions to actually find those products, where to buy them and purchase them. And Business Solutions is one of the best in the world at that. But it's time consuming, and it's costly sometimes to get those individual stores activated and knowing about Office Depot and buying those products. And that's where Varis came in, and this is where Varis can be a value force multiplier for the ODP Corporation. We actually took this retail company's catalogs, this catalog of items that they had negotiated with ODP Business Solutions, and we moved that on to the Varis platform. We digitize that catalog and put it onto the Varis platform. And because of that amazing purchasing experience that you saw -- Stephanie demonstrate, it's actually now easier for the employees of this retail company to do the right thing and harder to do the wrong thing. And it wasn't always like that because this particular company had what was -- what are called purchase cards. These are credit cards, business credit cards, sometimes you can expense them. And because it was maybe a little bit difficult at times to find that ODP catalog before Varis, they would take that credit card and they'd run to the corner store, they buy on an online consumer marketplace. And so instead of getting this great pricing that they negotiated with ODP Business Solutions, now they're spending. That spending is leaking out to these other suppliers. And now with Varis, we're bringing all of that spend into one place. It's in -- what happened was we were -- because after the Varis solution was implemented, we decreased spend on those purchase cards as P-Cards over 70%, and the revenue on a monthly basis for ODP Business Solutions shot up 20%. It's incredibly powerful, the value that we're driving to our partner customers at ODP Business Solutions. So look, these last 2 years has really been amazing, learning from American Freight, how we're driving hard dollar cost savings to the suppliers we're bringing. We're driving employee productivity through the simplicity and the power of our procurement technology. Learning and listening when Mitch from Buy Supply tells us that we're just a trajectory changer for his business in terms of growth. And learning and just seeing the benefits that we're bringing to our sister company, ODP Business Solutions. We're so proud of the customer feedback. We know we're winning when customers are using our product and finding value from it. And we also know that we're winning when our customers, and they're starting to do this now are telling their peers and other companies about us. And our growth is coming now from referrals to customers. That's how you know we're winning. This has never been more important. When I sit down and talk to customers, again, I love my job and love that I get to do that so often. There's still a lot of inflationary pressures that are putting pressures on cost and price. There is still -- the labor market is still very tight. And so when you're a solution like Varis is that drives hard dollar savings, employee productivity, we are right where we need to be. This is Varis' time. Thanks for letting me share a little bit about our customers and our business model, and I'll hand it back over to Prentis.

Thank you. As Daniel mentioned, look, we're super encouraged by the early feedback. We're encouraged by what we hear from our supplier customers. We're encouraged by what we hear from our buyer customers. Our journey is early. We're still ramping. We're just getting started in terms of our innovation and where we're focused. We're continuing to ramp up customers. We're getting a lot of feedback and a lot of early learnings from those. We see a lot of customers that are well ahead of what we originally planned. We see some that are right on track award to plan. We see some that are looking for opportunities to help sort of expand that. And that's really where our team is sort of designed to come to action in terms of how do we double down on that opportunity, how do we continue to drive that innovation and how do we keep scaling it. And so as we look forward, our focus, as we mentioned, is about getting transaction volume on the platform, getting more adoption, more customers to use it, more supplier engagement. And we'll just continue to track and measure that as we go forward. With that, maybe we'll move over to Q&A., and I'll invite everybody. Stephanie will be on the phone, and then we can invite everybody else back up.

Great. Just give us just one moment as we pull up some chairs here. All the team, great. All right. So this is the Q&A portion. We'll go ahead and open it up for questions. We'll also -- I've received a few questions from the webcast as well. In case if we can get there too, we can answer some of their questions. So let me go ahead and turn it over to the group here and see if you have any questions. Yes, in the back.

[indiscernible].

Yes. So let me just repeat the question for you, and then we'll have the mics. The question is, can we talk more about the addressable market?

Yes, I can sort of weigh in. If you just look at some of the stats from Forrester, the mid-market segment alone in the U.S. spends trillions of dollars, call it, north of $4 trillion a year just on the services and supplies that they need to invest.

Indirect spend.

Indirect. Sorry, indirect, yes, right, to be able to run their business. As we look at the platform today, we're very heavily focused on products and just the indirect goods, the sort of skewable products that you could see online. But that's just the start. We know already we see demand for services, and we'll continue to expand into that over time. And so you'll see that.

Is that -- how big is that market?

Mid-market alone is, quoting Forrester, it was like $4.5 trillion.

I mean the subsegment that we're focused on.

The subset of products, I mean I would measure it for sure in the hundreds of billions of dollars at least. Yes.

Great. So it was $400 million or something like that. It's a gigantic market opportunity.

And I say that we're heavily focused on mid-market, but we are finding areas where there's a lot of larger enterprises that actually run like mid-markets. So like when you look at a company that has thousands of stores, it's a very -- it's a large enterprise, but they're operating more like a mid-market. When you look at each one of these little businesses, runs like its own. And so we're seeing actually a lot of penetration or some early strong adoption and strong customer fit and even some of the bigger customers.

I think this is where I said in the beginning, this is a category creator because it's such a large market, $4 trillion total market, $400 billion in this area of spend. It's all still being done, as Daniel -- Dave said, it's all still being done in an old technology, whether it's by person, by Excel spreadsheet, by fax. It's all being done person to person. It's right for what I call the category creation piece. And as you create that category, as they took it through, that's where Varis becomes so powerful.

Easy to use. Everyone's used the technology like that before. saving money, saving time. And as we believe in the low-cost model, ODP, this is just the low-cost model on steroids because it gives you the ability to anyone, any site to say productivity and same people.

Great.

Just to clarify, sorry. So you're saying that the overall mid-market is $4 trillion, but then the subset is, I'm sorry, what?

$400 billion. $400 billion. We think, roughly, that was that last time, I think, we looked at the Forrester data. That's not our data. That's third-party market data.

Okay. Let me go to the next question.

Maybe just in the spirit of kind of sizing the TAM. And any other numbers you could throw out that would help us kind of quantify the opportunity? I mean, conceptually, it sounds amazing. It seems like you made a lot of progress, but anything else either in terms of customers or suppliers onboarded revenue, where you see things over the next year or 2?

I would say there's a few ways to look at it. As I mentioned, we're onboarding customers now. We're starting to ramp that up. One of the interesting things about our platform is you'll see some of the customers will spend -- you're talking millions of dollars a year that a single customer will spend on the platform. You're talking orders of tens of thousands that aren't that uncommon. So it's a different sort of type of transaction is when that needs this level of purchasing control. As we continue to ramp, we have the right level of suppliers right now to at least hit our goals for the year in terms of -- to meet the requirements for the customers that we want to onboard. We're going to continue to look for opportunities to augment that and sort of add more suppliers, but we feel really good about our -- the supplier network that's in place to meet the 2023 needs. And then we're just going to continue to work with customers. And we continue to see wins like those as we continue to partner with suppliers like ODP Business Solutions, and we start to see that we can start to demonstrate revenue growth for them. We see that as another way that's going to fuel sort of getting more and more customers on the platform as well.

Got it. And just one follow-up. Can you remind us what kind of unit economics look like in terms of take rate? And just what defines your revenue? And maybe give us a rough sense of where you'd have to scale revenue to achieve profitability.

I think when we think about our unit economics, the scalability is really what we like to see here on a platform like Varis. So when we look at our unit economics, we're looking at, hey, what's the size of that customer coming in, so there's mid-market customers where they're spending literally millions of dollars on the platform like that. When we look at how fast can we onboard those in. And I think that's where Varis comes into play. As Daniel mentioned, it's not the case of these large procurement systems that sort of cost literally over $1 million to implement. Varis is very good at scaling that. So our unit economics are good, and we pass that on also to the end user customer, too.

Yes. I think that's a big part of our story is that it's easy when you see great software like that to sort of categorize as in the software-as-a-service space. And there is a component of that, what we're doing. You probably saw from my background, I spent over 10 years at an IT outsourcing firm; and then Dell, where I did the same thing. A lot of systems integrations, a lot of big software integrations. Right now, we are literally 1/10 of the cost of a typical enterprise software system. And I think that just shows 2 things. One, the sophistication of the technology platform and the automation there, but also, I think just the ultimate long-term scalability and attractiveness on a unit economic basis of the business.

Which is maybe at a 100,000-foot level. It's -- there's a small SaaS charge, plus its gross transaction value, which is products and services. It's a percentage of that transaction that runs through.

Anthony or Daniel, you can jump in and sort of give sort of ranges. We're not going to be specific for anticompetitive reasons. But from a modeling perspective, which you all will like to see, just think of it as -- he gave you that 1/10 of typical SaaS piece. That's really to pay for any type of onboarding, et cetera. Because this will scale like crazy, it's probably the right word, but it's -- as this grows, we don't have to keep adding SG&A. We don't -- we think that scale is tremendously as a result. The platform costs, we said 2022 was our peak year over the next 3 years. You'll see that come down because as revenue comes up, obviously, that was going to do some absorption. But it's a GTV play. I'm used to saying GMV, and so I can't get that on my head. But -- and again, I think people know what Amazon does, we're not at that level. But right now, it's really getting the value of -- my biggest KPI and our Board's biggest KPI is GTV because that's going to show the category creations working. And then obviously, over time, as the category becomes more and more consolidated with Varis, we have the ability to -- obviously, that transactional fee is negotiated via Daniel. Daniel, you can give a little bit of color around that. But...

Yes. No, I mean the reason we are so focused on that transaction volume through the platform is that's when we know like I was talking about before, we're saving fires money. We're driving new business to suppliers, and then we have that take rate. Take rate is it's complicated, right? There's a number of factors what product category you're in, the level of value that we're providing that supplier around customer acquisition. But it's lower, but proportionate to what you'd see kind of the take rate in the consumer marketplace.

Anthony?

Yes, I think if you look at the 3 sources of revenue, obviously, subscription revenue is going to be the base. That's what we have today, GTV is going to be the key metric. And it's a metric that we'll share in the coming quarters of how that's building, so that you can keep track. It's to what and the how of how we're going to measure the success of the business for investors.

Right. And that ties into one of the questions that I came through on the website, which was, what type of model? Is it a revshare.

It's a GTV model.

We believe in making money when we when our customers use our product not just one being implemented.

Exactly.

Yes. And you gave the example of -- Dan, you gave the example of putting a B2B customer on Varis and lovely things happening. So what's the pushback you get when you ask someone to do that, that? Doesn't prompt that to happen faster? Why aren't you doing that with everyone?

Yes. We have a pretty great...

And I didn't ask him to ask that question because that's the question I ask.

We have a pretty great betting average. I think you think about these organizations, many of whom don't have procurement systems today, as I mentioned, they're out of reach, right? They're at this enterprise level price tag that companies say between $100 million and a couple of billion dollars of annual revenue haven't been able to access before. And so when we really explain our model to prospective customers, whether they're existing ODP business solution customers or ones that we acquire through other partners, there's just this immediate recognition of that value. And so it's really how do we begin to integrate it in with their IT systems, how do we begin to roll it out to the different locations. And that happens really rapidly. It's not measured in months and quarters, it's measured in weeks and months, which is much faster than a typical software implementation. And so I think there really is broad recognition from our prospects and our customers that this is working, and there's not a lot of pushback.

Yes?

I think I missed it, but you said 3 sorts of revenue you said subscription fees, then you said revshare of the GTV., What was the third?

Services. Services, the merchandising and services are the 2 sources within GTV -- and then...

And services is not implemented yet because we're focused on merchandising for us. We will add services in the future, which will merchandising and service is equal to GTV.

And is subscription based on [ Per seat ]? How does that work?

Typically a license -- sorry, subscription license, Yes. Customers, particularly the customers that expand, let's add a large number of their own privately negotiated agreements on the platform, they'll pay us fee. So they'll pay us an annual fee to use the procurement platform. Think of it as a proceed.

So given the operating leverage here that's somewhat fixed SG&A, how do we think about when you eventually break it out in terms of what the gross margins of the business look like? Is it 100% margin because effectively just a pass-through? How does that work?

When you look on our margin side, it won't be 100% margin. So we still have costs when you think about, hey, what's the cost to run the platform to run the services? And then also, like when you're bringing on newer customers, you do have some of those costs customer up and running, but those decrease over time as a percentage. So we will see higher margins, but we don't look at it like 100% pass-through.

But I mean, I think the point is it's a highly scalable model. Very highly scale.

Very highly scalable.

That's a good point. I do have a question from the website, if I could just answer this, and then we'll keep getting back to the questions. But it says what have we experienced in terms of customer usage from the time a customer is initiated on the network until as they go forward. Is the usage growing? Is it declining? What do they experience?

I mean I can speak to that. So you start with an organization, you integrate with their accounts payable system, sometimes with their ERP and then you invite all the employees that are eligible to buy on to that environment. And what's amazing about our solution is that it's everything is in one place, as Stephanie showed you. So it could be those long-term strategic supplier relationships that you've had for decades, and it could be brand-new suppliers that we're introducing into that environment. And what we see is in the case of American Freight, I think 91% or 92% of stores were spending within 2.5 weeks that large retailer. I talked about 98% of storage are spending 4 weeks. So when it's easier to do the right thing and just access one system that's simple, that's convenient, that's consumer like, you see rapid adoption. And because it's simple, they keep coming back, right? So there's not this, I'm going to try it out. I'm going to kick the tires and see it's sticky.

I think it's a great question. It's something that on a quarterly basis, we're going to try to give you an update on, here's how the GTV trend is going. Obviously, you guys are going to ask the same question. We'll continue to comment on adoption rate has been very strong. If we see that go one direction or the other, we'll highlight that. But I think one thing that impressed me by this team as I hired this team is a maniacal focus on the customer. And I think that's they listen to the customer -- they have a lot of experience in this sector before, which obviously helps tremendously from an ability to understand how to build. But I think listening to the customer has been a huge -- again, this didn't exist, but I think customers -- as a former Chief Operating Officer, saving productivity, saving labor hours, saving money on indirect purchases, I mean that's the ultimate low-cost model. And your people are able to focus on selling versus I think American Freight is a perfect example, versus doing tactical work. And that opportunity as a cost-focused CEO says, "Hey, every other CEO in these tough economic conditions should be thinking about that in all these spaces.

Great. I'll turn to some more questions.

Well, Prentis, one for you. So if you got to pick your budget, I know that other people on the stage might pick budgets, but you mentioned that you were -- you had other things you were working on, other things you wanted to sort of add to the platform. So what would the first priority be? And what kind of resources would you need to get there?

Look, I think building a platform like this is pretty tricky, and there's a lot of compelling things that you can go after. Sometimes, I like to label them at times, shiny objects, even things that I would love to do like right now. But you also have to know how fast they run, and you also have to make sure that you're methodically scaling so that you don't get too far ahead of yourself. I think right now, we're focused on the right things. We spend a lot of time listening to our customers. We're getting -- we're continuing to scale that out. We're continuing to sort of iterate and innovate on their behalf. There will be, over time, as we continue to scale, though, a number of really attractive additional growth opportunities for us, adding incremental capabilities onto the platform.

Give him a few examples.

Examples could be continuing to simplify the payments space because there's a -- particularly in this mid-market world, where you're managing and processing all the transactions, expanding further into simplifying that is a huge opportunity. There's opportunities over time, even the partner with companies like Bayer or others, around how to simplify even the logistics, particularly for a group of customers who today don't have good visibility into all their orders and where they're coming from and how to optimize that. There's a number. There's a whole list of things that we could go after. But right now for us, as we mentioned, the #1 focus and the thing that I laser-focus our team on is getting transaction volume on the platform, continuing to sort of scale. It's -- again, we're just ramping our first set of customers. While we're super encouraged by what we hear, we just need to continue to run that. When that engine starts to really scale up the way that we predict it will, then we'll start looking at the next round of capabilities. And as we do that, there will also be things that we'll look at that will open up additional tranches of customers as well in terms of like services or other capabilities that will make us even more attractive.

I think at a macro level, I think service -- I mean payments is exciting for me down the road. But I think services from a GTV perspective, think of anything can for ABM. But I think if you're a mid-market company, [ if you cut ] a better enterprise level deal from a janitorial services perspective, for example, across all your stores. Or I mean there's a number of B2B services today that I think are nice fits from a platform perspective. And that's -- again, it's -- we'll keep -- again, our peak spend has happened in '22. We think we can add these categories methodically over time. And our Board is committed to this, but our Board is also making it clear of -- we have a -- I said purposely in the beginning, we have a historical capital rate for all of going to stay within, and we're going to continue to buy back our shares to hit that $1 billion commitment. So balancing that capital allocation across all this is important. But there are -- I'm personally really excited by services. I think payments in the future for that would be, again, a perfect opportunity to consolidate. Because what does that do for mid-market? Saves people, saves efficiency, back below cost model, saves time. And you can -- if you don't have a whole team that has to do invoicing, it's all consolidated, all your invoice supplier invoices are consolidated into one invoice, that becomes pretty powerful.

Just had a question on customer acquisition. It sounds like you're still kind of onboarding and ramping the first kind of set of customers who are going to be with Varis. But just in terms of the customer acquisition strategy, how is it working? I mean do you guys have a Varis specific sales team or using B2B sales team? How much of it is kind of porting over existing BSD customers? If you could just speak to that, that would be helpful.

Yes. So we have a dedicated Varis go-to-market team. We find that's important. We're in this interesting space where we're helping our customers see the value of our procurement technology, but also our suppliers as well. And so we found that we needed a dedicated specialized team. It's small, right? And it's lean. And so the way that we scale, we do work with ADP business solutions to move customers over, but we have an expanding percentage of our customers that are coming through other sources as well across a variety of different industries. Where we find that we really win is decentralized space where you've got -- you notice there's a theme from a lot of the examples I gave, and it's not accident all where. You have lots of locations, a lot of difficulty getting controls and visibility into that spend, but you still need that flexibility. It's those kind of industries. So retail, manufacturing, hospitality or where we're seeing a lot of our customer acquisition.

Dan, touch on some of the other channels that...

We've talked about...

That will be -- again, we're methodically expanding, but I think there's some -- I mean Daniel doesn't have to continue to add salespeople to hit all these targets. We'll continue to grow that. But there's other channels that are developing that people see value in.

Yes. Example of that -- absolutely. Example of that is one that we've discussed previously publicly is Microsoft. We have a great partnership with them really see the value of taking this great purchasing experience and integrating it into some of their enterprise systems and software. So there's value on both sides of that, and that will be a rich source of customer acquisition in the quarters and years to come.

Great. I had another question, if I can jump to the web questions. And this is more of a clarifying question, and I'll toss this to probably Prentis or Dan here, which is when you look at -- you had mentioned both today as well as on the recent earnings call that you're going to be in porting over some smaller ODP Business Solution customers to Varis. Could you clarify again the benefit for the customer? Number one; two, for Varis; and #3 for ODP Business Solutions themselves, if you can clarify that.

Yes. So if you think about what we're doing for these customers, these are customers who want to get access to the supplies they need to run their business. What we do when we migrate a customer over is they still get the buy from ODP business solutions. They still -- ODP Business Solutions gets all the revenue from the purchases that they get. But what we do is we combine that with a broad set of other categories of goods that these customers need. So we make it really, really easy for this employee now to go to one spot and fill up their shopping basket with a mix of goods from across a variety of suppliers to meet all their needs. So we help that customer out really easily. So they come and benefit. And for us -- so the customer wins. The other thing, ODP Business Solutions wins because they get more wallet share from that particular customer. They get the retain and benefit from the growth that occurs as those customers come on to the platform. And then Varis wins because we're driving traffic. We're creating value. We're driving the flywheel and is starting to spin. And it helps us spin it further and helps us continue to expand. So it's a triple win.

Great. Any other questions. There was one more clarifying question that came through, but I'll turn it over to you first.

I guess when you -- it sounds pretty self-explanatory why customers want to come on to the platform. How do you win suppliers onto the platform, especially those where using the numbers you said, 83% of Varis sales aren't coming from a digital ecosystem today. How do you convince them that they should spend all the time and effort to get set up selling through Varis?

If you think about that stat I shared, the 65% of business buyers want a digital experience. If you've only sold through field salespeople literally going site-to-site door-to-door, that stat I just shared is both a huge threat and a tremendous opportunity, right? And so if we can create this great purchasing -- digital purchasing platform and help acquire and move these suppliers, customers over into that platform, they'll win. And that's part of the attractiveness. The other thing, too, is that this is a stat from MDM Magazine and its pre-pandemic I share it because it only accelerated during the pandemic. So there are 5 million field sellers and distributors in 2015. There were 4 million by 2019. This is a staggering decrease. These are human beings that go out and sell industrial supplies and other products out in the field. And so it's really reflective of suppliers need to have a more efficient way to acquire customers. And when we can bring -- you saw that quote from the Buy Supply business development, more customers in 2 months than they got in 2 years. When you create that kind of scale for a supplier, it's just a no-brainer.

It's as the ones I've talked to at the CEO level, it's a new channel. I call it a new channel, and it's a new channel that I -- from a route to market for them, for the supplier, it's cheaper. You're not -- you're paying us a transaction fee. You're not paying sales commission, right? So -- and for Infinity, you're not paying sales commissions. So field sales are expensive. They're important for our most office enterprise. They're important for some categories. But a lot of these customers, it's expensive to go off and create that relationship to really hit that mid-market. And having this buying platform allows them to get on, control their prices because it's a contractual relationship, right? They never have to worry about being private branded by someone else or having -- and so for buyer and seller, it's a very clean relationship. And I think from a pure cost of route to market, it's more cost effective over time.

Can I bring this one up? This one came through just a moment ago, is you had mentioned that 2022 was the peak year of investment into the platform. And obviously, we just launched the network. But are you still working to source additional areas of funding for the business going forward? And where does that stand?

We're still -- very importantly, we're still continuing the process Perella Weinberg. I think from an overall board perspective, we're aligned that we'll continue to look for an opportunity to -- right now, I personally believe that Varis is getting either 0 value-add from an overall stock price perspective or potentially even negative value. But our Board is very clear. We're committed to our 3-year plan. But I think it's important to say many of you said, make sure you don't dilute us. And so we're going to make sure as this grows, we think the value continues to grow from an external perspective. We're going to find that right value opportunity. And we'll -- if it's the right value, the Board will assess it, and we'll make sure that it brings value to our current shareholders. And I think, again, tech companies -- as you get the flywheel going over time, obviously, that value or time continues to grow, and we're going to find that right opportunity. But we're still going to look at it. We're still going to be in that process. But we're going to be -- make sure we're selective and make sure our shareholders get the return they would expect if there was an investment that was coming in.

Great. Other questions? Sure.

Had a quick one because I know that you're still ramping. So -- but on the safety products portion of the presentation that was given, I noticed like a Fastenal and Granger logo in terms of the product. So how do you work with distributors who typically would be selling those products to customers? But the -- it seems like you're sourcing from those distributors, so taking account of that? Or...

We -- so we partner with distributors, sellers that are on our platform that can serve customers. But we also -- remember, we also allow our customers. If they have prenegotiated agreements or relationships that they want to integrate on the platform, we allow them to bring those on as well. So think of it as a world where they can -- you have now this custom almost marketplace experience for you, so you can mix all those together. Does that answer your question?

So those were in your suppliers? Illustrative was in the customers.

Some of them probably were some of the suppliers we have a relationship with. I think some of them were definitely ones that in this sort of this demo were private relationships that, that customer bought it.

We were trying to demonstrate how the platform works. It's a mix. Some of our customers might use exclusively ours, but a lot of times when we actually encourage them to have a mix.

I have another one from the web that I'll read if no one else has on currently. This looks like a -- I'm not paraphrasing actually reading this directly. This looks like an incredible opportunity. I didn't set this up. Just what is the biggest challenge now if you look at going forward and how as an investor can we measure success? How do we follow this?

I think having built platforms like this or businesses like this, I mean the most important thing for us to focus on right now is to continue to obsess over our customers, continue to focus on their needs, continue to focus on both supply side and buy side. And we need to just continuously and methodically drive the traffic on the platform. And that's part of why we've talked about the gross transaction volume. That's the thing that we pay attention to. We want to be able to drive that. As we see that grow and we continue to automate more and more of the platform, you'll see that efficiently scale over time, and that's what we'll start to open up additional opportunities.

I think the velocity of the GTV is going to be really important quarter-over-quarter to show that progress. Again, this is early stages. But as we progress through this year, more importantly, the exit velocity of this year to [ '24 ], it's going to be really important to make sure that we're disclosing, sharing that information because that's going to be the biggest correlator to both top line and cash flow.

Yes. And I'll just emphasize what Anthony. As the CEO, and Marcus was there as well, we -- the Board believes that GTV is the right external KPI. And we want to -- because again, we think we're a category creator here. And that just -- the GTV shows that the flywheel is working. It shows that, that session that you're talking about, Prentis is talking about and the work Daniel's done so far is working in that value proposition is there. So we're going to obsess on GTV over the next 18, 24 months because again, it's a wide open category. And it hasn't been asked yet, but I'm sure people are going, can someone else do this? The answer is they could, but it's hard. Having the -- I think the first slide was important. We had a team that's done this in a similar area before. This is different than anything that's been done. But this is hard to do. And so once we create that category, it's going to be a really attractive fortress from a future value for the company perspective. And again, it's solving the value proposition. You're saving money, you're driving productivity, you're making it easy for your employees to use. And that's -- I always say the low-cost model wins. The low-cost model is winning now as values become important again from -- as how you drive companies.

Yes?

In the Investor Day where you talked about cash flow breakeven for the business in 2025, what does that imply for GTV?

Break that up.

We haven't broken that out. Yes. When we look at no, I said, we didn't break that out. Because it's going to be depending on the take rate of the product set, it may vary. So we didn't provide that statistic.

And as the business continues to evolve, you're going to see a mix of GTV and we're going to get subscription revenue, DTV, though, is the thing that we're primarily focused on, but it's going to be a mix of those. And then it's going to be -- there's a lot of different variable that.

But I think as we have quarter-over-quarter or more GTV, we'll continue to have these conversations with our investors. And as you have more maturity in the model, we'll be able to sort of zeroing in more and more on what those economics are. And I think that's going to help. We're still very committed to our 2025 plan. And I think from a target perspective, we think that we are in a strong position from a supplier adoption perspective, which obviously was one of the first questions that people would ask in, we're actually well ahead of that to a point where sort of slowing that down now because we think we have a good -- at least for the short term, we want to incorporate to suppliers and get them on. And obviously, my daily -- I'm going to talk to Daniel, it's about - it's bookings to revenue and it's GTV. And so it's just giving you that building the flywheel, building the flywheel. But every quarter, we'll talk about that. And every quarter, we'll talk about how we're doing from an economics perspective. Are we on track for 2025?

Just one more on the 2025. If things don't go according to plan, inflation is elevated, and on the other end, things go much better than planned, is cash flow breakeven the best way to look at it? Because if the business is, let's say, underperforming, you're spending less. So therefore, it's little breakeven. And if it's outperforming, there's higher acquisition cost. So is it kind of being managed for breakeven in '25? Is that the way to kind of think about it?

I think that's the way we modeled it. Obviously, the next year, 18 to 24 months are going to be critical in terms of the growth. So if we're seeing significant growth, I'd love to come back as a team and say we're making incremental investments because the highest return is going to be as we see the GDP growth and the stickiness there. So it's not being managed for cash flow breakeven as the...

I would say a little different -- your first part is correct. I think the other part of -- as -- again, as this platform scales, it gets really exciting, and I'll leave it at that. But I think if we overachieve on '25, you're going to see a lot more cash generation of before '25 as we get ahead from a pie perspective.

I'm only saying that if the -- the every incremental customer, the acquisition cost, that's what I'm kind of that's -- do you see what I'm saying?

Yes. But I think it's not one for one from a management perspective because the Terry and Daniel and team did a really good job of we're automating a lot of that process more and more. But from an ingestion of supplier perspective, there's a lot of IP around that. There's a lot of IP on how we are automating our customer onboarding piece. So over time, as we get better and better at that and the stack gets stronger and stronger, I think that -- I mean, Daniel will scale. Of course, they'll want more headcount, but that's going to be a much smaller percentage as a -- from a revenue perspective. And again, Dan, you jump in on that because we've talked about the modeling the time.

No, that's right. It's -- Jason can probably speak to this too, but it's a model that OpEx grows at a lower rate -- slower rate than revenue.

Any more questions from the group? I did have just one last question. I think it's very important, which not for me, but it came from the web here. The Varis team very in-depth experience. They've had experience building prior platforms and business models. Can you compare and contrast kind of where Varis is compared to your experiences in the past?

Look, I would say I'm super encouraged where we are right now. The biggest thing that we see is we've always known there's a huge market opportunity out there. And the big thing for us was to make sure that we're building the right platform that -- and the right solution that generates -- that has clear market fit. And I would say right now, we see that to be true. At least all indications from our current customers and the current suppliers is that we're on the right track. And we've been listening to them, and we've been innovating on their behalf and iterating on the platform, and that's good. And I see -- and as I see sort of the customer adoption, when you see the adoption rates, when a customer really connects all the dots and integrates, when you see them go to 90-plus percent of their stores in a few weeks, that's huge. And that's huge. It gives us a lot of confidence sort of in the solution.

Macro level relative to [indiscernible] carefully relative to your experience, I think that was one of the questions. Are you...

Yes. So what I was going to say is that gives us confidence in where we're at. And as I look at sort of where we are versus where I would expect us to be based on my experience, I think we're right exactly what I would expect. And I think I fully expect there to be some learning along the way. I think there's going to be some opportunities, some things that are going to work better than plans, some things that are not going to work as well as planned. But I feel really good about where we're at.

Super. Any more questions? I think we're right at the bottom of the hour, so we're going to be ending the meeting. So again, thank you for everybody who attended today as well as the...

A word? I do really appreciate everyone attending in person online. I know you guys are super busy. It's earning season. Again, thank you. We'll be around here for a few minutes longer. If you people want to have some conversations with the team. But I know it took a lot of effort. It took us like 20 minutes to go to like 3 blocks earlier today. So I mean we don't have that in Florida. But it was awesome you're here, and I appreciate it. Greatly, and I know Anthony and the whole team as well. So thanks.

Thank you.