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O’Reilly Automotive, Inc. Reports Second Quarter 2022 Results
Source: Nasdaq GlobeNewswire / 27 Jul 2022 16:30:13 America/New_York
- Second quarter comparable store sales growth of 4.3%, three-year stack increase of 30.4%
- 25% three-year compound growth in second quarter diluted earnings per share
- $1.4 billion net cash provided by operating activities year-to-date
SPRINGFIELD, Mo., July 27, 2022 (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 for its second quarter ended June 30, 2022.
2nd Quarter Financial Results
Greg Johnson, O’Reilly’s President and CEO, commented, “Our second quarter comparable store sales increase of 4.3%, and the corresponding three-year comparable store sales stack increase of 30.4%, are clear indicators of our Team’s ability to grow our business and take market share. After experiencing volatility in our sales results in the first quarter, the trends in our business improved and were steady throughout the second quarter.”Mr. Johnson continued, “We continue to be very pleased with the strong growth in our professional business, which performed in line with our expectations for the second quarter, while our DIY business faced more pronounced pressure from the impact of high fuel prices and continued significant broad-based inflation. Even facing these macroeconomic challenges, we are pleased with the strong sales volumes our Team is generating in 2022, against comparisons to record comparable store sales results the last two years. We are extremely proud of Team O’Reilly’s ability to deliver continued growth on top of the strongest years in our Company’s history, and I am grateful for the unrelenting focus each of our Team Members places on taking care of our customers.”
Sales for the second quarter ended June 30, 2022, increased $205 million, or 6%, to $3.67 billion from $3.47 billion for the same period one year ago. Gross profit for the second quarter increased 3% to $1.88 billion (or 51.3% of sales) from $1.83 billion (or 52.7% of sales) for the same period one year ago. Selling, general and administrative expenses (“SG&A”) for the second quarter increased 5% to $1.09 billion (or 29.6% of sales) from $1.03 billion (or 29.7% of sales) for the same period one year ago. Operating income for the second quarter increased to $799 million (or 21.8% of sales) from $796 million (or 23.0% of sales) for the same period one year ago.
Net income for the second quarter ended June 30, 2022, decreased $9 million, or 1%, to $577 million (or 15.7% of sales) from $585 million (or 16.9% of sales) for the same period one year ago. Diluted earnings per common share for the second quarter increased 5% to $8.78 on 66 million shares versus $8.33 on 70 million shares for the same period one year ago.
Year-to-Date Financial Results
Mr. Johnson concluded, “The pressure on our DIY customers from heightened inflation and fuel prices has impacted our year-to-date performance, and we have factored the current environment into our expectations for the second half of the year. As a result, we are reducing our full-year comparable store sales guidance to a range of 3% to 5%. Despite these pressures, we remain confident in the strength of the core underlying demand drivers of our business. We are pleased with our start to the third quarter in July and are extremely confident in our Team’s ability to execute our business model and provide the excellent customer service that drives our success as we finish out 2022.”Sales for the first six months of 2022 increased $410 million, or 6%, to $6.97 billion from $6.56 billion for the same period one year ago. Gross profit for the first six months of 2022 increased 4% to $3.59 billion (or 51.6% of sales) from $3.47 billion (or 52.9% of sales) for the same period one year ago. SG&A for the first six months of 2022 increased 7% to $2.12 billion (or 30.5% of sales) from $1.98 billion (or 30.2% of sales) for the same period one year ago. Operating income for the first six months of 2022 decreased 1% to $1.47 billion (or 21.1% of sales) from $1.49 billion (or 22.7% of sales) for the same period one year ago.
Net income for the first six months of 2022 decreased $28 million, or 3%, to $1.06 billion (or 15.2% of sales) from $1.09 billion (or 16.6% of sales) for the same period one year ago. Diluted earnings per common share for the first six months of 2022 increased 4% to $15.94 on 66 million shares versus $15.39 on 71 million shares for the same period one year ago.
2nd 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 4.3% for the second quarter ended June 30, 2022, on top of 9.9% for the same period one year ago. Comparable store sales increased 4.5% for the six months ended June 30, 2022, on top of 16.5% for the same period one year ago.Share Repurchase Program
During the second quarter ended June 30, 2022, the Company repurchased 2.2 million shares of its common stock, at an average price per share of $620.27, for a total investment of $1.38 billion. During the first six months of 2022, the Company repurchased 3.4 million shares of its common stock, at an average price per share of $635.40, for a total investment of $2.15 billion. Subsequent to the end of the second quarter and through the date of this release, the Company repurchased an additional 0.4 million shares of its common stock, at an average price per share of $654.37, for a total investment of $268 million. The Company has repurchased a total of 89.4 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 $214.47, for a total aggregate investment of $19.16 billion. As of the date of this release, the Company had approximately $1.09 billion remaining under its current share repurchase authorization.Updated Full-Year 2022 Guidance
The table below outlines the Company’s updated guidance for selected full-year 2022 financial data:For the Year Ending December 31, 2022 Comparable store sales 3% to 5% Total revenue $14.0 billion to $14.3 billion Gross profit as a percentage of sales 50.8% to 51.3% Operating income as a percentage of sales 20.0% to 20.3% Effective income tax rate 23.0% Diluted earnings per share (1) $31.25 to $31.75 Net cash provided by operating activities $2.1 billion to $2.5 billion Capital expenditures $650 million to $750 million Free cash flow (2) $1.3 billion to $1.6 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, 2022 Net cash provided by operating activities $ 2,140 to $ 2,560 Less: Capital expenditures 650 to 750 Excess tax benefit from share-based compensation payments 10 to 20 Investment in tax credit equity investments 180 to 190 Free cash flow $ 1,300 to $ 1,600 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, July 28, 2022, 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 (404) 400-0571 and the conference call identification number is 87962276#. A replay of the conference call will be available on the Company’s website through Thursday, July 27, 2023.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 June 30, 2022, the Company operated 5,873 stores in 47 U.S. states and 27 stores in 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 COVID-19 pandemic or other public health crises; the economy in general; inflation; consumer debt levels; product demand; 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; 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, 2021, 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)June 30, 2022 June 30, 2021 December 31, 2021 (Unaudited) (Unaudited) (Note) Assets Current assets: Cash and cash equivalents $ 253,904 $ 631,618 $ 362,113 Accounts receivable, net 330,672 273,148 272,562 Amounts receivable from suppliers 123,112 113,174 113,112 Inventory 4,005,384 3,647,413 3,686,383 Other current assets 86,800 72,994 70,092 Total current assets 4,799,872 4,738,347 4,504,262 Property and equipment, at cost 7,160,583 6,767,596 6,948,038 Less: accumulated depreciation and amortization 2,878,170 2,603,442 2,734,523 Net property and equipment 4,282,413 4,164,154 4,213,515 Operating lease, right-of-use assets 1,965,941 2,028,329 1,982,478 Goodwill 881,299 881,207 879,340 Other assets, net 138,164 137,296 139,112 Total assets $ 12,067,689 $ 11,949,333 $ 11,718,707 Liabilities and shareholders’ equity (deficit) Current liabilities: Accounts payable $ 5,258,712 $ 4,583,570 $ 4,695,312 Self-insurance reserves 137,281 118,259 128,794 Accrued payroll 106,814 129,025 107,588 Accrued benefits and withholdings 148,805 221,382 234,872 Income taxes payable 2,080 29,776 — Current portion of operating lease liabilities 341,705 333,624 337,832 Other current liabilities 417,792 355,976 370,217 Total current liabilities 6,413,189 5,771,612 5,874,615 Long-term debt 4,669,833 3,825,177 3,826,978 Operating lease liabilities, less current portion 1,683,216 1,747,267 1,701,757 Deferred income taxes 203,744 177,118 175,212 Other liabilities 205,137 210,465 206,568 Shareholders’ equity (deficit): Common stock, $0.01 par value: Authorized shares – 245,000,000 Issued and outstanding shares – 63,752,833 as of June 30, 2022, 69,132,589 as of June 30, 2021, and 67,029,042 as of December 31, 2021 638 691 670 Additional paid-in capital 1,286,651 1,295,363 1,305,508 Retained deficit (2,391,108 ) (1,075,769 ) (1,365,802 ) Accumulated other comprehensive loss (3,611 ) (2,591 ) (6,799 ) Total shareholders’ (deficit) equity (1,107,430 ) 217,694 (66,423 ) Total liabilities and shareholders’ equity (deficit) $ 12,067,689 $ 11,949,333 $ 11,718,707 Note: The balance sheet at December 31, 2021, 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 For the Six Months Ended June 30, June 30, 2022 2021 2022 2021 Sales $ 3,670,737 $ 3,465,601 $ 6,966,748 $ 6,556,500 Cost of goods sold, including warehouse and distribution expenses 1,786,019 1,639,223 3,373,958 3,089,327 Gross profit 1,884,718 1,826,378 3,592,790 3,467,173 Selling, general and administrative expenses 1,086,168 1,030,795 2,124,710 1,980,485 Operating income 798,550 795,583 1,468,080 1,486,688 Other income (expense): Interest expense (37,384 ) (37,657 ) (72,225 ) (75,163 ) Interest income 682 456 1,192 993 Other, net (4,550 ) 2,952 (6,488 ) 4,643 Total other expense (41,252 ) (34,249 ) (77,521 ) (69,527 ) Income before income taxes 757,298 761,334 1,390,559 1,417,161 Provision for income taxes 180,538 175,883 331,919 330,101 Net income $ 576,760 $ 585,451 $ 1,058,640 $ 1,087,060 Earnings per share-basic: Earnings per share $ 8.86 $ 8.41 $ 16.08 $ 15.53 Weighted-average common shares outstanding – basic 65,116 69,618 65,840 69,997 Earnings per share-assuming dilution: Earnings per share $ 8.78 $ 8.33 $ 15.94 $ 15.39 Weighted-average common shares outstanding – assuming dilution 65,686 70,264 66,434 70,640 O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)For the Six Months Ended June 30, 2022 2021 Operating activities: Net income $ 1,058,640 $ 1,087,060 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, equipment and intangibles 168,045 158,917 Amortization of debt discount and issuance costs 2,242 2,207 Deferred income taxes 28,302 21,922 Share-based compensation programs 12,702 12,575 Other 283 1,382 Changes in operating assets and liabilities: Accounts receivable (60,593 ) (45,359 ) Inventory (318,756 ) 6,357 Accounts payable 563,012 398,785 Income taxes payable 12,013 12,408 Other (73,917 ) 56,578 Net cash provided by operating activities 1,391,973 1,712,832 Investing activities: Purchases of property and equipment (228,921 ) (222,607 ) Proceeds from sale of property and equipment 8,222 4,566 Investment in tax credit equity investments (4,080 ) (1,768 ) Other (86 ) (1,083 ) Net cash used in investing activities (224,865 ) (220,892 ) Financing activities: Proceeds from borrowings on revolving credit facility 785,800 — Payments on revolving credit facility (785,800 ) — Proceeds from the issuance of long-term debt 847,314 — Principal payments on long-term debt — (300,000 ) Payment of debt issuance costs (6,323 ) (3,299 ) Repurchases of common stock (2,151,242 ) (1,064,189 ) Net proceeds from issuance of common stock 35,112 41,921 Other (350 ) (313 ) Net cash used in financing activities (1,275,489 ) (1,325,880 ) Effect of exchange rate changes on cash 172 (82 ) Net (decrease) increase in cash and cash equivalents (108,209 ) 165,978 Cash and cash equivalents at beginning of the period 362,113 465,640 Cash and cash equivalents at end of the period $ 253,904 $ 631,618 Supplemental disclosures of cash flow information: Income taxes paid $ 291,695 $ 292,673 Interest paid, net of capitalized interest 68,318 76,788 O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
(Unaudited)For the Twelve Months Ended June 30, Adjusted Debt to EBITDAR: 2022 2021 (In thousands, except adjusted debt to EBITDAR ratio) GAAP debt $ 4,669,833 $ 3,825,177 Add: Letters of credit 108,891 84,045 Discount on senior notes 6,692 4,700 Debt issuance costs 23,475 20,123 Six-times rent expense 2,282,502 2,182,596 Adjusted debt $ 7,091,393 $ 6,116,641 GAAP net income $ 2,136,265 $ 2,007,257 Add: Interest expense 141,830 155,180 Provision for income taxes 619,047 596,239 Depreciation and amortization 337,345 321,679 Share-based compensation expense 24,783 23,842 Rent expense (i) 380,417 363,766 EBITDAR $ 3,639,687 $ 3,467,963 Adjusted debt to EBITDAR 1.95 1.76 (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 June 30, 2022 and 2021 (in thousands):
Total lease cost, per ASC 842, for the twelve months ended June 30, 2022 $ 453,697 Less: Variable non-contract operating lease components, related to property taxes and insurance, for the twelve months ended June 30, 2022 73,280 Rent expense for the twelve months ended June 30, 2022 $ 380,417 Total lease cost, per ASC 842, for the twelve months ended June 30, 2021 $ 432,619 Less: Variable non-contract operating lease components, related to property taxes and insurance, for the twelve months ended June 30, 2021 68,853 Rent expense for the twelve months ended June 30, 2021 $ 363,766 June 30, 2022 2021 Selected Balance Sheet Ratios: Inventory turnover (1) 1.7 1.7 Average inventory per store (in thousands) (2) $ 679 $ 636 Accounts payable to inventory (3) 131.3 % 125.7 % For the Three Months Ended For the Six Months Ended June 30, June 30, 2022 2021 2022 2021 Reconciliation of Free Cash Flow (in thousands): Net cash provided by operating activities $ 702,087 $ 822,160 $ 1,391,973 $ 1,712,832 Less: Capital expenditures 124,931 127,728 228,921 222,607 Excess tax benefit from share-based compensation payments 3,353 10,808 5,819 16,815 Investment in tax credit equity investments — 1,762 4,080 1,768 Free cash flow $ 573,803 $ 681,862 $ 1,153,153 $ 1,471,642 For the Three Months Ended For the Six Months Ended For the Twelve Months Ended June 30, June 30, June 30, 2022 2021 2022 2021 2022 2021 Store Count: Beginning domestic store count 5,811 5,660 5,759 5,594 5,710 5,562 New stores opened 62 50 115 118 164 159 Stores closed — — (1 ) (2 ) (1 ) (11 ) Ending domestic store count 5,873 5,710 5,873 5,710 5,873 5,710 Beginning Mexico store count 27 22 25 22 22 21 New stores opened — — 2 — 5 1 Ending Mexico store count 27 22 27 22 27 22 Total ending store count 5,900 5,732 5,900 5,732 5,900 5,732 For the Three Months Ended For the Twelve Months Ended June 30, June 30, 2022 2021 2022 2021 Store and Team Member Information: (4) Total employment 84,788 79,170 Square footage (in thousands) 44,072 42,714 Sales per weighted-average square foot (5) $ 82.30 $ 80.35 $ 311.47 $ 295.60 Sales per weighted-average store (in thousands) (6) $ 617 $ 600 $ 2,335 $ 2,202 (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. 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.
