• O’Reilly Automotive, Inc. Reports Second Quarter 2023 Results

    Source: Nasdaq GlobeNewswire / 26 Jul 2023 16:31:58   America/New_York

    • Second quarter comparable store sales growth of 9.0%
    • 16% increase in second quarter diluted earnings per share to $10.22
    • Announced Executive Leadership Succession Plan

    SPRINGFIELD, Mo., July 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 second quarter ended June 30, 2023.

    2nd Quarter Financial Results
    Greg Johnson, O’Reilly’s CEO, commented, “We are very pleased to report another quarter of continued strong growth, highlighted by a 9.0% increase in comparable store sales and a 16% increase in diluted earnings per share to $10.22. Team O’Reilly’s commitment to providing consistently excellent customer service drove robust double-digit professional and solid DIY comparable store sales growth in the quarter. I want to congratulate our over 88,000 dedicated Team Members on their incredible performance in the second quarter and express my sincere appreciation for their relentless focus on delivering industry-leading service to our customers each and every day.”

    Sales for the second quarter ended June 30, 2023, increased $398 million, or 11%, to $4.07 billion from $3.67 billion for the same period one year ago. Gross profit for the second quarter increased 11% to $2.09 billion (or 51.3% of sales) from $1.88 billion (or 51.3% of sales) for the same period one year ago. Selling, general and administrative expenses (“SG&A”) for the second quarter increased 14% to $1.23 billion (or 30.3% of sales) from $1.09 billion (or 29.6% of sales) for the same period one year ago. Operating income for the second quarter increased 7% to $854 million (or 21.0% of sales) from $799 million (or 21.8% of sales) for the same period one year ago.

    Net income for the second quarter ended June 30, 2023, increased $51 million, or 9%, to $627 million (or 15.4% of sales) from $577 million (or 15.7% of sales) for the same period one year ago. Diluted earnings per common share for the second quarter increased 16% to $10.22 on 61 million shares versus $8.78 on 66 million shares for the same period one year ago.

    Year-to-Date Financial Results
    Mr. Johnson continued, “We have opened 100 net, new stores across 34 U.S. states, Puerto Rico, and Mexico so far in 2023 and are on pace to meet our goal of 180 to 190 net, new store openings in 2023. We continue to be very pleased with our new store performance, driven by our well-trained and technically-proficient Professional Parts People. We are also excited to celebrate the expansion of our distribution network with the opening of our first O’Reilly distribution center in Mexico in July. This new, 370,000 square foot facility strengthens our existing store network with enhanced inventory availability, empowering higher service levels and establishing the critical foundation for long-term store growth in Mexico.”

    Sales for the first six months of 2023 increased $810 million, or 12%, to $7.78 billion from $6.97 billion for the same period one year ago. Gross profit for the first six months of 2023 increased 11% to $3.98 billion (or 51.1% of sales) from $3.59 billion (or 51.6% of sales) for the same period one year ago. SG&A for the first six months of 2023 increased 13% to $2.41 billion (or 30.9% of sales) from $2.12 billion (or 30.5% of sales) for the same period one year ago. Operating income for the first six months of 2023 increased 7% to $1.57 billion (or 20.2% of sales) from $1.47 billion (or 21.1% of sales) for the same period one year ago.

    Net income for the first six months of 2023 increased $86 million, or 8%, to $1.14 billion (or 14.7% of sales) from $1.06 billion (or 15.2% of sales) for the same period one year ago. Diluted earnings per common share for the first six months of 2023 increased 16% to $18.49 on 62 million shares versus $15.94 on 66 million shares for the same period one year ago.

    Mr. Johnson concluded, “The strong top-line performance we delivered through the first half of the year exceeded our expectations, and we remain pleased with our performance thus far in July. We believe the core underlying demand drivers of our industry remain solid, and more importantly, we remain confident in our Team’s ability to consistently execute our proven dual market strategy and expand our market share. Based on our strong year-to-date results and continued robust sales trends, we are increasing our full-year comparable store sales guidance from a range of 4% to 6% to a range of 5% to 7%. Finally, I would like to again thank Team O’Reilly for delivering strong results in the first half of 2023 – your commitment to our customers remains the key to O’Reilly’s ongoing success.”

    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 9.0% for the second quarter ended June 30, 2023, on top of 4.3% for the same period one year ago. Comparable store sales increased 9.8% for the six months ended June 30, 2023, on top of 4.5% for the same period one year ago.

    Share Repurchase Program
    During the second quarter ended June 30, 2023, the Company repurchased 0.8 million shares of its common stock, at an average price per share of $904.37, for a total investment of $680 million. During the first six months of 2023, the Company repurchased 2.1 million shares of its common stock, at an average price per share of $849.48, for a total investment of $1.79 billion. Excise tax on shares repurchased, assessed at one percent of the fair market value of net shares repurchased, was $16.5 million for the first six months of 2023. Subsequent to the end of the second quarter and through the date of this release, the Company repurchased an additional 0.1 million shares of its common stock, at an average price per share of $952.24, for a total investment of $119 million. The Company has repurchased a total of 92.7 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 $236.52, for a total aggregate investment of $21.94 billion. As of the date of this release, the Company had approximately $1.81 billion 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 5.0% to 7.0%
    Total revenue $15.4 billion to $15.7 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 22.5%
    Diluted earnings per share (1) $37.05 to $37.55
    Net cash provided by operating activities $2.6 billion to $3.0 billion
    Capital expenditures $750 million to $800 million
    Free cash flow (2) $1.9 billion to $2.2 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 $2,670 to $3,030
    Less:Capital expenditures  750 to  800
     Excess tax benefit from share-based compensation payments  20 to  30
    Free cash flow $1,900 to $2,200
             

    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.

    Executive Leadership Succession Plan
    Today, in a separate press release, O’Reilly also announced the Company’s leadership succession plan. Effective January 31, 2024, Greg Johnson, who currently serves as the Company’s Chief Executive Officer (“CEO”) will retire and, at that time, Brad Beckham, who currently serves as the Company’s Co-President, will be promoted to CEO, and Brent Kirby, who currently serves as the Company’s Co-President, will be promoted to President.

    Earnings Conference Call Information
    The Company will host a conference call on Thursday, July 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 273805. A replay of the conference call will be available on the Company’s website through Friday, July 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 June 30, 2023, the Company operated 6,071 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 Relations Contacts
     Mark Merz (417) 829-5878
     Eric Bird (417) 868-4259
      
     Media Contact
     Sonya Cox (417) 829-5709


    O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (In thousands, except share data)
     
      June 30, 2023 June 30, 2022 December 31, 2022
      (Unaudited) (Unaudited) (Note)
    Assets         
    Current assets:         
    Cash and cash equivalents $ 57,880  $253,904  $108,583 
    Accounts receivable, net   374,714   330,672   343,155 
    Amounts receivable from suppliers   138,666   123,112   127,019 
    Inventory   4,626,410   4,005,384   4,359,126 
    Other current assets   113,597   86,800   110,376 
    Total current assets   5,311,267   4,799,872   5,048,259 
              
    Property and equipment, at cost   7,872,672   7,160,583   7,438,065 
    Less: accumulated depreciation and amortization   3,170,474   2,878,170   3,014,024 
    Net property and equipment   4,702,198   4,282,413   4,424,041 
              
    Operating lease, right-of-use assets   2,185,196   1,965,941   2,112,267 
    Goodwill   897,128   881,299   884,445 
    Other assets, net   180,834   138,164   158,967 
    Total assets $ 13,276,623  $12,067,689  $12,627,979 
              
    Liabilities and shareholders’ deficit         
    Current liabilities:         
    Accounts payable $ 6,219,838  $5,258,712  $5,881,157 
    Self-insurance reserves   131,781   137,281   138,926 
    Accrued payroll   127,333   106,814   126,888 
    Accrued benefits and withholdings   150,453   148,805   166,433 
    Income taxes payable   233,507   2,080    
    Current portion of operating lease liabilities   380,618   341,705   366,721 
    Other current liabilities   450,169   417,792   383,692 
    Total current liabilities   7,693,699   6,413,189   7,063,817 
              
    Long-term debt   4,873,702   4,669,833   4,371,653 
    Operating lease liabilities, less current portion   1,870,392   1,683,216   1,806,656 
    Deferred income taxes   260,642   203,744   245,347 
    Other liabilities   205,661   205,137   201,258 
              
    Shareholders’ equity (deficit):         
    Common stock, $0.01 par value:         
    Authorized shares – 245,000,000         
    Issued and outstanding shares –         
    60,402,359 as of June 30, 2023,         
    63,752,833 as of June 30, 2022, and         
    62,353,221 as of December 31, 2022   604   638   624 
    Additional paid-in capital   1,330,270   1,286,651   1,311,488 
    Retained deficit   (2,994,418)  (2,391,108)  (2,375,860)
    Accumulated other comprehensive income (loss)   36,071   (3,611)  2,996 
    Total shareholders’ deficit   (1,627,473)  (1,107,430)  (1,060,752)
              
    Total liabilities and shareholders’ deficit $ 13,276,623  $12,067,689  $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  For the Six Months Ended
      June 30,  June 30, 
      2023
     2022 2023
     2022
    Sales $ 4,068,991  $3,670,737  $ 7,776,855  $6,966,748 
    Cost of goods sold, including warehouse and distribution expenses   1,982,409   1,786,019    3,799,944   3,373,958 
    Gross profit   2,086,582   1,884,718    3,976,911   3,592,790 
                 
    Selling, general and administrative expenses   1,232,809   1,086,168    2,406,493   2,124,710 
    Operating income   853,773   798,550    1,570,418   1,468,080 
                 
    Other income (expense):            
    Interest expense   (49,587)  (37,384)   (94,159)  (72,225)
    Interest income   760   682    1,628   1,192 
    Other, net   4,186   (4,550)   8,665   (6,488)
    Total other expense   (44,641)  (41,252)   (83,866)  (77,521)
                 
    Income before income taxes   809,132   757,298    1,486,552   1,390,559 
    Provision for income taxes   181,767   180,538    342,302   331,919 
    Net income $ 627,365  $576,760  $ 1,144,250  $1,058,640 
                 
    Earnings per share-basic:            
    Earnings per share $ 10.32  $8.86  $ 18.66  $16.08 
    Weighted-average common shares outstanding – basic   60,817   65,116    61,324   65,840 
                 
    Earnings per share-assuming dilution:            
    Earnings per share $ 10.22  $8.78  $ 18.49  $15.94 
    Weighted-average common shares outstanding – assuming dilution   61,366   65,686    61,878   66,434 


    O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In thousands)
     
      For the Six Months Ended
      June 30, 
      2023
     2022
    Operating activities:      
    Net income $ 1,144,250  $1,058,640 
    Adjustments to reconcile net income to net cash provided by operating activities:      
    Depreciation and amortization of property, equipment and intangibles   191,673   168,045 
    Amortization of debt discount and issuance costs   2,431   2,242 
    Deferred income taxes   13,507   28,302 
    Share-based compensation programs   14,571   12,702 
    Other   75   283 
    Changes in operating assets and liabilities:      
    Accounts receivable   (31,443)  (60,593)
    Inventory   (257,337)  (318,756)
    Accounts payable   335,299   563,012 
    Income taxes payable   261,208   12,013 
    Other   (22,865)  (73,917)
    Net cash provided by operating activities   1,651,369   1,391,973 
           
    Investing activities:      
    Purchases of property and equipment   (460,942)  (228,921)
    Proceeds from sale of property and equipment   7,056   8,222 
    Investment in tax credit equity investments   (4,149)  (4,080)
    Other   (1,971)  (86)
    Net cash used in investing activities   (460,006)  (224,865)
           
    Financing activities:      
    Proceeds from borrowings on revolving credit facility   2,776,000   785,800 
    Payments on revolving credit facility   (1,976,000)  (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   (24)  (6,323)
    Repurchases of common stock   (1,791,451)  (2,151,242)
    Net proceeds from issuance of common stock   48,680   35,112 
    Other   (354)  (350)
    Net cash used in financing activities   (1,243,149)  (1,275,489)
           
    Effect of exchange rate changes on cash   1,083   172 
    Net decrease in cash and cash equivalents   (50,703)  (108,209)
    Cash and cash equivalents at beginning of the period   108,583   362,113 
    Cash and cash equivalents at end of the period $ 57,880  $253,904 
           
    Supplemental disclosures of cash flow information:      
    Income taxes paid $ 65,361  $291,695 
    Interest paid, net of capitalized interest   88,924   68,318 


    O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
    SELECTED FINANCIAL INFORMATION
    (Unaudited)
     
      For the Twelve Months Ended
      June 30, 
    Adjusted Debt to EBITDAR: 2023 2022
    (In thousands, except adjusted debt to EBITDAR ratio)      
    GAAP debt $ 4,873,702 $4,669,833
    Add:Letters of credit   111,428  108,891
     Discount on senior notes   5,888  6,692
     Debt issuance costs   20,410  23,475
     Six-times rent expense   2,455,938  2,282,502
    Adjusted debt $ 7,467,366 $7,091,393
           
    GAAP net income $ 2,258,260 $2,136,265
    Add:Interest expense   179,654  141,830
     Provision for income taxes   636,388  619,047
     Depreciation and amortization   381,561  337,345
     Share-based compensation expense   28,327  24,783
     Rent expense (i)   409,323  380,417
    EBITDAR $ 3,893,513 $3,639,687
           
    Adjusted debt to EBITDAR   1.92  1.95
           

    (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, 2023 and 2022 (in thousands):

            
      For the Twelve Months Ended
      June 30,
      2023 2022
    Total lease cost, per ASC 842 $485,805 $453,697
    Less:Variable non-contract operating lease components, related to property taxes and insurance  76,482  73,280
    Rent expense $409,323 $380,417


             
      June 30, 
      2023 2022
    Selected Balance Sheet Ratios:        
    Inventory turnover (1)   1.7  1.7
    Average inventory per store (in thousands) (2) $ 762 $679
    Accounts payable to inventory (3)   134.4%  131.3%


                  
       For the Three Months Ended  For the Six Months Ended
       June 30,  June 30, 
       2023 2022 2023 2022
    Reconciliation of Free Cash Flow (in thousands):            
    Net cash provided by operating activities $ 937,605 $702,087 $ 1,651,369 $1,391,973
    Less:Capital expenditures   237,674  124,931   460,942  228,921
     Excess tax benefit from share-based compensation payments   14,612  3,353   18,990  5,819
     Investment in tax credit equity investments   4,149     4,149  4,080
    Free cash flow $ 681,170 $573,803 $ 1,167,288 $1,153,153


                 
      For the Three Months Ended  For the Six Months Ended  For the Twelve Months Ended
      June 30,  June 30,  June 30, 
      2023 2022 2023  2022  2023  2022 
    Store Count:            
    Beginning domestic store count  5,986 5,811  5,929  5,759   5,873  5,710 
    New stores opened  41 62  100  115   158  164 
    Stores closed    (2) (1)  (4) (1)
    Ending domestic store count  6,027 5,873  6,027  5,873   6,027  5,873 
                 
    Beginning Mexico store count  43 27  42  25   27  22 
    New stores opened  1   2  2   17  5 
    Ending Mexico store count  44 27  44  27   44  27 
                 
    Total ending store count  6,071 5,900  6,071  5,900   6,071  5,900 


                 
      For the Three Months Ended  For the Twelve Months Ended
      June 30,  June 30, 
      2023 2022 2023 2022
    Store and Team Member Information: (4)            
    Total employment   88,149  84,788      
    Square footage (in thousands)   45,622  44,072      
    Sales per weighted-average square foot (5) $ 88.12 $82.30 $ 334.21 $311.47
    Sales per weighted-average store (in thousands) (6) $ 665 $617 $ 2,516 $2,335
                 

    (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.


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