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O’Reilly Automotive, Inc. Reports First Quarter 2023 Results
Source: Nasdaq GlobeNewswire / 26 Apr 2023 16:30:30 America/New_York
- First quarter comparable store sales growth of 10.8%
- 15% increase in first quarter diluted earnings per share to $8.28
- Opened 6,000th store and expanded into Puerto Rico during the first quarter
SPRINGFIELD, Mo., April 26, 2023 (GLOBE NEWSWIRE) -- O’Reilly Automotive, Inc. (the “Company” or “O’Reilly”) (Nasdaq: ORLY), a leading retailer in the automotive aftermarket industry, today announced record revenue and earnings for its first quarter ended March 31, 2023.
1st Quarter Financial Results
Greg Johnson, O’Reilly’s CEO, commented, “We are pleased to report a very strong start to 2023, highlighted by robust 10.8% growth in comparable store sales and a 15% increase in our first quarter diluted earnings per share to $8.28. Team O’Reilly’s commitment to taking care of our customers drove another quarter of double-digit comparable store sales growth in our professional business, while also generating growth in DIY sales. Our Team continues to execute our proven dual market strategy at an extremely high level, and we remain confident in their ability to out-service the competition and expand our market share. I would like to thank each of our over 86,000 Team Members for their relentless focus on providing the best customer service in our industry.”Sales for the first quarter ended March 31, 2023, increased $412 million, or 12%, to $3.71 billion from $3.30 billion for the same period one year ago. Gross profit for the first quarter increased 11% to $1.89 billion (or 51.0% of sales) from $1.71 billion (or 51.8% of sales) for the same period one year ago. Selling, general and administrative expenses for the first quarter increased 13% to $1.17 billion (or 31.7% of sales) from $1.04 billion (or 31.5% of sales) for the same period one year ago. Operating income for the first quarter increased 7% to $717 million (or 19.3% of sales) from $670 million (or 20.3% of sales) for the same period one year ago.
Net income for the first quarter ended March 31, 2023, increased $35 million, or 7%, to $517 million (or 13.9% of sales) from $482 million (or 14.6% of sales) for the same period one year ago. Diluted earnings per common share for the first quarter increased 15% to $8.28 on 62 million shares versus $7.17 on 67 million shares for the same period one year ago.
Mr. Johnson continued, “During the first quarter we celebrated several milestones, including the opening of our 6,000th store, the opening of our first store in Maryland, which marked our entrance into our 48th U.S. state, and our expansion into Puerto Rico, where we opened two stores and a distribution center. In addition, we remain on schedule to open our next distribution center in Guadalajara, Mexico, this summer. This facility will provide an enhanced level of service to the large and growing Guadalajara metro area, while also better positioning our overall distribution network for future growth across Mexico. Team O’Reilly’s incredible dedication and hard work drove these tremendous accomplishments, and I could not be more proud of our achievements this quarter and the great work our Teams have done to position us to build upon our record of strong, profitable growth well into the future.”
1st Quarter Comparable Store Sales Results
Comparable store sales are calculated based on the change in sales for U.S. stores open at least one year and exclude sales of specialty machinery, sales to independent parts stores, and sales to Team Members. Online sales for ship-to-home orders and pick-up-in-store orders for U.S. stores open at least one year are included in the comparable store sales calculation. Comparable store sales increased 10.8% for the first quarter ended March 31, 2023, on top of 4.8% for the same period one year ago.Share Repurchase Program
During the first quarter ended March 31, 2023, the Company repurchased 1.4 million shares of its common stock, at an average price per share of $819.06, for a total investment of $1.11 billion. Excise tax on shares repurchased, assessed at one percent of the fair market value of net shares repurchased, was $11.1 million for the three months ended March 31, 2023. Subsequent to the end of the first quarter and through the date of this release, the Company repurchased an additional 0.2 million shares of its common stock, at an average price per share of $864.44, for a total investment of $137 million. The Company has repurchased a total of 92.0 million shares of its common stock under its share repurchase program since the inception of the program in January of 2011 and through the date of this release, at an average price of $231.17, for a total aggregate investment of $21.28 billion. As of the date of this release, the Company had approximately $475 million remaining under its current share repurchase authorization.Updated Full-Year 2023 Guidance
The table below outlines the Company’s updated guidance for selected full-year 2023 financial data:For the Year Ending December 31, 2023 Net, new store openings 180 to 190 Comparable store sales 4% to 6% Total revenue $15.2 billion to $15.5 billion Gross profit as a percentage of sales 50.8% to 51.3% Operating income as a percentage of sales 19.8% to 20.3% Effective income tax rate 22.9% Diluted earnings per share (1) $36.50 to $37.00 Net cash provided by operating activities $2.5 billion to $2.9 billion Capital expenditures $750 million to $800 million Free cash flow (2) $1.8 billion to $2.1 billion (1) Weighted-average shares outstanding, assuming dilution, used in the denominator of this calculation, includes share repurchases made by the Company through the date of this release.
(2) Free cash flow is a non-GAAP financial measure. The table below reconciles Free cash flow guidance to Net cash provided by operating activities guidance, the most directly comparable GAAP financial measure:For the Year Ending (in millions) December 31, 2023 Net cash provided by operating activities $ 2,560 to $ 2,920 Less: Capital expenditures 750 to 800 Excess tax benefit from share-based compensation payments 10 to 20 Free cash flow $ 1,800 to $ 2,100 Non-GAAP Information
This release contains certain financial information not derived in accordance with United States generally accepted accounting principles (“GAAP”). These items include adjusted debt to earnings before interest, taxes, depreciation, amortization, share-based compensation, and rent (“EBITDAR”) and free cash flow. The Company does not, nor does it suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information. The Company believes that the presentation of adjusted debt to EBITDAR and free cash flow provide meaningful supplemental information to both management and investors that is indicative of the Company’s core operations. The Company has included a reconciliation of this additional information to the most comparable GAAP measure in the table above and the selected financial information below.Earnings Conference Call Information
The Company will host a conference call on Thursday, April 27, 2023, at 10:00 a.m. Central Time to discuss its results as well as future expectations. Investors may listen to the conference call live on the Company’s website at www.OReillyAuto.com by clicking on “Investor Relations” and then “News Room.” Interested analysts are invited to join the call. The dial-in number for the call is (888) 506-0062 and the conference call identification number is 533312. A replay of the conference call will be available on the Company’s website through Friday, April 26, 2024.About O’Reilly Automotive, Inc.
O’Reilly Automotive, Inc. was founded in 1957 by the O’Reilly family and is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States, serving both the do-it-yourself and professional service provider markets. Visit the Company’s website at www.OReillyAuto.com for additional information about O’Reilly, including access to online shopping and current promotions, store locations, hours and services, employment opportunities, and other programs. As of March 31, 2023, the Company operated 6,029 stores across 48 U.S. states, Puerto Rico, and Mexico.Forward-Looking Statements
The Company claims the protection of the safe-harbor for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these statements by forward-looking words such as “estimate,” “may,” “could,” “will,” “believe,” “expect,” “would,” “consider,” “should,” “anticipate,” “project,” “plan,” “intend,” or similar words. In addition, statements contained within this press release that are not historical facts are forward-looking statements, such as statements discussing, among other things, expected growth, store development, integration and expansion strategy, business strategies, future revenues, and future performance. These forward-looking statements are based on estimates, projections, beliefs, and assumptions and are not guarantees of future events and results. Such statements are subject to risks, uncertainties, and assumptions, including, but not limited to, the economy in general; inflation; consumer debt levels; product demand; a public health crisis; the market for auto parts; competition; weather; tariffs; availability of key products and supply chain disruptions; business interruptions, including terrorist activities, war and the threat of war; failure to protect our brand and reputation; challenges in international markets; volatility of the market price of our common stock; our increased debt levels; credit ratings on public debt; historical growth rate sustainability; our ability to hire and retain qualified employees; risks associated with the performance of acquired businesses; damage, failure or interruption of information technology systems, including information security and cyber-attacks; and governmental regulations. Actual results may materially differ from anticipated results described or implied in these forward-looking statements. Please refer to the “Risk Factors” section of the annual report on Form 10-K for the year ended December 31, 2022, and subsequent Securities and Exchange Commission filings, for additional factors that could materially affect the Company’s financial performance. Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.For further information contact: Investor & Media Contacts Mark Merz (417) 829-5878 Eric Bird (417) 868-4259 O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) March 31, 2023 March 31, 2022 December 31, 2022 (Unaudited) (Unaudited) (Note) Assets Current assets: Cash and cash equivalents $ 59,872 $ 191,546 $ 108,583 Accounts receivable, net 346,037 305,358 343,155 Amounts receivable from suppliers 128,758 99,016 127,019 Inventory 4,543,980 3,845,881 4,359,126 Other current assets 109,347 81,580 110,376 Total current assets 5,187,994 4,523,381 5,048,259 Property and equipment, at cost 7,649,066 7,046,707 7,438,065 Less: accumulated depreciation and amortization 3,090,010 2,810,080 3,014,024 Net property and equipment 4,559,056 4,236,627 4,424,041 Operating lease, right-of-use assets 2,166,646 1,976,018 2,112,267 Goodwill 892,094 881,773 884,445 Other assets, net 167,026 142,590 158,967 Total assets $ 12,972,816 $ 11,760,389 $ 12,627,979 Liabilities and shareholders’ deficit Current liabilities: Accounts payable $ 6,055,992 $ 4,943,283 $ 5,881,157 Self-insurance reserves 136,723 137,627 138,926 Accrued payroll 111,324 93,623 126,888 Accrued benefits and withholdings 132,022 139,392 166,433 Income taxes payable 117,790 128,302 — Current portion of operating lease liabilities 375,451 334,884 366,721 Other current liabilities 427,006 393,762 383,692 Total current liabilities 7,356,308 6,170,873 7,063,817 Long-term debt 4,927,678 3,827,891 4,371,653 Operating lease liabilities, less current portion 1,854,533 1,698,787 1,806,656 Deferred income taxes 249,903 180,612 245,347 Other liabilities 209,411 210,499 201,258 Shareholders’ equity (deficit): Common stock, $0.01 par value: Authorized shares – 245,000,000 Issued and outstanding shares –
61,038,936 as of March 31, 2023,
65,919,929 as of March 31, 2022, and
62,353,221 as of December 31, 2022610 659 624 Additional paid-in capital 1,305,276 1,309,071 1,311,488 Retained deficit (2,952,797 ) (1,636,267 ) (2,375,860 ) Accumulated other comprehensive income (loss) 21,894 (1,736 ) 2,996 Total shareholders’ deficit (1,625,017 ) (328,273 ) (1,060,752 ) Total liabilities and shareholders’ deficit $ 12,972,816 $ 11,760,389 $ 12,627,979 Note: The balance sheet at December 31, 2022, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements.
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) For the Three Months Ended March 31, 2023 2022 Sales $ 3,707,864 $ 3,296,011 Cost of goods sold, including warehouse and distribution expenses 1,817,535 1,587,939 Gross profit 1,890,329 1,708,072 Selling, general and administrative expenses 1,173,684 1,038,542 Operating income 716,645 669,530 Other income (expense): Interest expense (44,572 ) (34,841 ) Interest income 868 510 Other, net 4,479 (1,938 ) Total other expense (39,225 ) (36,269 ) Income before income taxes 677,420 633,261 Provision for income taxes 160,535 151,381 Net income $ 516,885 $ 481,880 Earnings per share-basic: Earnings per share $ 8.36 $ 7.24 Weighted-average common shares outstanding – basic 61,840 66,572 Earnings per share-assuming dilution: Earnings per share $ 8.28 $ 7.17 Weighted-average common shares outstanding – assuming dilution 62,398 67,190 O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) For the Three Months Ended March 31, 2023 2022 Operating activities: Net income $ 516,885 $ 481,880 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, equipment and intangibles 93,747 82,923 Amortization of debt discount and issuance costs 1,215 1,102 Deferred income taxes 3,393 5,031 Share-based compensation programs 7,435 6,533 Other 29 1,007 Changes in operating assets and liabilities: Accounts receivable (2,610 ) (33,678 ) Inventory (179,481 ) (158,387 ) Accounts payable 172,701 247,280 Income taxes payable 145,441 138,228 Other (44,991 ) (82,033 ) Net cash provided by operating activities 713,764 689,886 Investing activities: Purchases of property and equipment (223,268 ) (103,990 ) Proceeds from sale of property and equipment 2,704 3,157 Investment in tax credit equity investments — (4,080 ) Other (956 ) (68 ) Net cash used in investing activities (221,520 ) (104,981 ) Financing activities: Proceeds from borrowings on revolving credit facility 1,216,000 — Payments on revolving credit facility (661,000 ) — Repurchases of common stock (1,111,461 ) (775,208 ) Net proceeds from issuance of common stock 15,146 19,939 Other (354 ) (350 ) Net cash used in financing activities (541,669 ) (755,619 ) Effect of exchange rate changes on cash 714 147 Net decrease in cash and cash equivalents (48,711 ) (170,567 ) Cash and cash equivalents at beginning of the period 108,583 362,113 Cash and cash equivalents at end of the period $ 59,872 $ 191,546 Supplemental disclosures of cash flow information: Income taxes paid $ 9,696 $ 8,584 Interest paid, net of capitalized interest 26,531 31,514 O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES SELECTED FINANCIAL INFORMATION (Unaudited) For the Twelve Months Ended March 31, Adjusted Debt to EBITDAR: 2023 2022 (In thousands, except adjusted debt to EBITDAR ratio) GAAP debt $ 4,927,678 $ 3,827,891 Add: Letters of credit 116,688 139,569 Discount on senior notes 6,088 4,188 Debt issuance costs 21,234 17,921 Six-times rent expense 2,404,986 2,255,652 Adjusted debt $ 7,476,674 $ 6,245,221 GAAP net income $ 2,207,655 $ 2,144,956 Add: Interest expense 167,451 142,103 Provision for income taxes 635,159 614,392 Depreciation and amortization 368,757 331,383 Share-based compensation expense 27,360 24,897 Rent expense (i) 400,831 375,942 EBITDAR $ 3,807,213 $ 3,633,673 Adjusted debt to EBITDAR 1.96 1.72 (i) The table below outlines the calculation of Rent expense and reconciles Rent expense to Total lease cost, per ASC 842, the most directly comparable GAAP financial measure, for the twelve months ended March 31, 2023 and 2022 (in thousands):
For the Twelve Months Ended March31, 2023 2022 Total lease cost, per ASC 842 $ 476,439 $ 448,384 Less: Variable non-contract operating lease components, related to property taxes and insurance 75,608 72,442 Rent expense $ 400,831 $ 375,942 March 31, 2023 2022 Selected Balance Sheet Ratios: Inventory turnover (1) 1.7 1.7 Average inventory per store (in thousands) (2) $ 754 $ 659 Accounts payable to inventory (3) 133.3 % 128.5 % For the Three Months Ended March 31, 2023 2022 Reconciliation of Free Cash Flow (in thousands): Net cash provided by operating activities $ 713,764 $ 689,886 Less: Capital expenditures 223,268 103,990 Excess tax benefit from share-based compensation payments 4,378 2,466 Investment in tax credit equity investments — 4,080 Free cash flow $ 486,118 $ 579,350 For the Three Months Ended For the Twelve Months Ended March 31, March 31, 2023 2022 2023 2022 Store Count: Beginning domestic store count 5,929 5,759 5,811 5,660 New stores opened 59 53 179 152 Stores closed (2 ) (1 ) (4 ) (1 ) Ending domestic store count 5,986 5,811 5,986 5,811 Beginning Mexico store count 42 25 27 22 New stores opened 1 2 16 5 Ending Mexico store count 43 27 43 27 Total ending store count 6,029 5,838 6,029 5,838 For the Three Months Ended For the Twelve Months Ended March 31, March 31, 2023 2022 2023 2022 Store and Team Member Information: (4) Total employment 86,774 82,516 Square footage (in thousands) 45,117 43,603 Sales per weighted-average square foot (5) $ 81.09 $ 74.43 $ 328.29 $ 309.40 Sales per weighted-average store (in thousands) (6) $ 611 $ 558 $ 2,467 $ 2,317 (1) Calculated as cost of goods sold for the last 12 months divided by average inventory. Average inventory is calculated as the average of inventory for the trailing four quarters used in determining the denominator.
(2) Calculated as inventory divided by store count at the end of the reported period.
(3) Calculated as accounts payable divided by inventory.
(4) Represents O’Reilly’s U.S. and Puerto Rico operations only.
(5) Calculated as sales less jobber sales, divided by weighted-average square footage. Weighted-average square footage is determined by weighting store square footage based on the approximate dates of store openings, acquisitions, expansions, or closures.
(6) Calculated as sales less jobber sales, divided by weighted-average stores. Weighted-average stores is determined by weighting stores based on their approximate dates of openings, acquisitions, or closures.
