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O’Reilly Automotive, Inc. Reports Third Quarter 2022 Results
Source: Nasdaq GlobeNewswire / 26 Oct 2022 16:30:25 America/New_York
- Third quarter comparable store sales growth of 7.6%, three-year stack increase of 31.2%
- 14% increase in third quarter diluted earnings per share to $9.17
- $2.4 billion net cash provided by operating activities year-to-date
SPRINGFIELD, Mo., Oct. 26, 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 and earnings for its third quarter ended September 30, 2022.
3rd Quarter Financial Results
Greg Johnson, O’Reilly’s President and CEO, commented, “We are pleased to report very strong performance in the third quarter, highlighted by a 7.6% increase in comparable store sales and an incredible three-year stacked comparable store sales increase of 31.2%. Our Team’s relentless focus on providing excellent service to our customers drove the robust sales strength in the quarter. Team O’Reilly once again delivered double-digit growth in our professional business for the quarter, while also driving low single-digit DIY sales growth. Our Team’s outstanding top-line performance, coupled with a steadfast commitment to expense control, resulted in a 14% increase in third quarter diluted earnings per share to $9.17, which represents a three-year compounded annual growth rate of 22%. I would like to take this opportunity to thank each of our over 84,000 Team Members for their continued hard work and unwavering commitment to providing unsurpassed levels of customer service – your dedication to our business and our customers remains the key to O’Reilly’s ongoing success.”Sales for the third quarter ended September 30, 2022, increased $319 million, or 9%, to $3.80 billion from $3.48 billion for the same period one year ago. Gross profit for the third quarter increased 6% to $1.93 billion (or 50.9% of sales) from $1.82 billion (or 52.3% of sales) for the same period one year ago. Selling, general and administrative expenses (“SG&A”) for the third quarter increased 6% to $1.13 billion (or 29.8% of sales) from $1.06 billion (or 30.6% of sales) for the same period one year ago. Operating income for the third quarter increased 7% to $804 million (or 21.2% of sales) from $755 million (or 21.7% of sales) for the same period one year ago.
Net income for the third quarter ended September 30, 2022, increased $27 million, or 5%, to $585 million (or 15.4% of sales) from $559 million (or 16.1% of sales) for the same period one year ago. Diluted earnings per common share for the third quarter increased 14% to $9.17 on 64 million shares versus $8.07 on 69 million shares for the same period one year ago.
Year-to-Date Financial Results
Mr. Johnson continued, “Year to date, we have opened 154 net, new stores across 38 U.S. states and Mexico, and we remain on track to reach our target of approximately 180 net, new store openings in 2022. Our Team of highly-trained and technically proficient Professional Parts People continues to drive strong new store performance, and we remain very confident in our ability to profitably grow in both existing and new market areas. We are pleased to announce our 2023 new store opening target of 180 to 190 net, new stores, an increase over our 2022 growth, as we look forward to expanding the O’Reilly footprint and extending our long track record of profitable growth.”Sales for the first nine months of 2022 increased $729 million, or 7%, to $10.77 billion from $10.04 billion for the same period one year ago. Gross profit for the first nine months of 2022 increased 5% to $5.53 billion (or 51.3% of sales) from $5.29 billion (or 52.7% of sales) for the same period one year ago. SG&A for the first nine months of 2022 increased 7% to $3.26 billion (or 30.2% of sales) from $3.04 billion (or 30.3% of sales) for the same period one year ago. Operating income for the first nine months of 2022 increased 1% to $2.27 billion (or 21.1% of sales) from $2.24 billion (or 22.3% of sales) for the same period one year ago.
Net income for the first nine months of 2022 decreased $2 million to $1.64 billion (or 15.3% of sales) from $1.65 billion (or 16.4% of sales) for the same period one year ago. Diluted earnings per common share for the first nine months of 2022 increased 7% to $25.08 on 66 million shares versus $23.45 on 70 million shares for the same period one year ago.
3rd 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 7.6% for the third quarter ended September 30, 2022, on top of 6.7% for the same period one year ago. Comparable store sales increased 5.6% for the nine months ended September 30, 2022, on top of 12.9% for the same period one year ago.Share Repurchase Program
During the third quarter ended September 30, 2022, the Company repurchased 1.0 million shares of its common stock, at an average price per share of $683.09, for a total investment of $710 million. During the first nine months of 2022, the Company repurchased 4.4 million shares of its common stock, at an average price per share of $646.61, for a total investment of $2.86 billion. Subsequent to the end of the third 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 $727.12, for a total investment of $161 million. The Company has repurchased a total of 90.2 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 $219.14, for a total aggregate investment of $19.77 billion. As of the date of this release, the Company had approximately $483 million 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 4.5% to 5.5% Total revenue $14.1 billion to $14.3 billion Gross profit as a percentage of sales 50.8% to 51.3% Operating income as a percentage of sales 20.3% to 20.6% Effective income tax rate 23.0% Diluted earnings per share(1) $32.35 to $32.85 Net cash provided by operating activities $2.5 billion to $3.0 billion Capital expenditures $550 million to $650 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, 2022 Net cash provided by operating activities $ 2,540 to $ 2,960 Less: Capital expenditures 550 to 650 Excess tax benefit from share-based compensation payments 10 to 20 Investment in tax credit equity investments 180 to 190 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, October 27, 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 61519118#. A replay of the conference call will be available on the Company’s website through Thursday, October 26, 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 September 30, 2022, the Company operated 5,910 stores in 47 U.S. states and 28 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)September 30, 2022 September 30, 2021 December 31, 2021 (Unaudited) (Unaudited) (Note) Assets Current assets: Cash and cash equivalents $ 67,060 $ 449,302 $ 362,113 Accounts receivable, net 338,122 282,883 272,562 Amounts receivable from suppliers 135,584 110,882 113,112 Inventory 4,137,945 3,646,988 3,686,383 Other current assets 82,045 72,154 70,092 Total current assets 4,760,756 4,562,209 4,504,262 Property and equipment, at cost 7,291,681 6,874,639 6,948,038 Less: accumulated depreciation and amortization 2,947,861 2,672,954 2,734,523 Net property and equipment 4,343,820 4,201,685 4,213,515 Operating lease, right-of-use assets 2,109,581 2,011,115 1,982,478 Goodwill 881,102 878,872 879,340 Other assets, net 142,769 135,504 139,112 Total assets $ 12,238,028 $ 11,789,385 $ 11,718,707 Liabilities and shareholders’ deficit Current liabilities: Accounts payable $ 5,574,098 $ 4,608,549 $ 4,695,312 Self-insurance reserves 142,390 122,551 128,794 Accrued payroll 109,095 89,095 107,588 Accrued benefits and withholdings 167,452 288,134 234,872 Income taxes payable 63,916 158,481 — Current portion of operating lease liabilities 360,529 336,962 337,832 Other current liabilities 423,999 385,982 370,217 Total current liabilities 6,841,479 5,989,754 5,874,615 Long-term debt 4,370,772 3,826,073 3,826,978 Operating lease liabilities, less current portion 1,809,241 1,729,013 1,701,757 Deferred income taxes 218,087 172,807 175,212 Other liabilities 203,912 212,591 206,568 Shareholders’ equity (deficit): Common stock, $0.01 par value: Authorized shares – 245,000,000 Issued and outstanding shares – 62,798,821 as of September 30, 2022, 67,684,615 as of September 30, 2021, and 67,029,042 as of December 31, 2021 628 677 670 Additional paid-in capital 1,292,725 1,296,358 1,305,508 Retained deficit (2,494,833 ) (1,430,060 ) (1,365,802 ) Accumulated other comprehensive loss (3,983 ) (7,828 ) (6,799 ) Total shareholders’ deficit (1,205,463 ) (140,853 ) (66,423 ) Total liabilities and shareholders’ deficit $ 12,238,028 $ 11,789,385 $ 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 Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Sales $ 3,798,619 $ 3,479,570 $ 10,765,367 $ 10,036,070 Cost of goods sold, including warehouse and distribution expenses 1,863,657 1,661,330 5,237,615 4,750,657 Gross profit 1,934,962 1,818,240 5,527,752 5,285,413 Selling, general and administrative expenses 1,130,768 1,063,641 3,255,478 3,044,126 Operating income 804,194 754,599 2,272,274 2,241,287 Other income (expense): Interest expense (43,164 ) (34,873 ) (115,389 ) (110,036 ) Interest income 1,435 485 2,627 1,478 Other, net (616 ) 318 (7,104 ) 4,961 Total other expense (42,345 ) (34,070 ) (119,866 ) (103,597 ) Income before income taxes 761,849 720,529 2,152,408 2,137,690 Provision for income taxes 176,411 161,877 508,330 491,978 Net income $ 585,438 $ 558,652 $ 1,644,078 $ 1,645,712 Earnings per share-basic: Earnings per share $ 9.25 $ 8.14 $ 25.30 $ 23.67 Weighted-average common shares outstanding – basic 63,288 68,608 64,979 69,529 Earnings per share-assuming dilution: Earnings per share $ 9.17 $ 8.07 $ 25.08 $ 23.45 Weighted-average common shares outstanding – assuming dilution 63,860 69,240 65,566 70,174 O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)For the Nine Months Ended September 30, 2022 2021 Operating activities: Net income $ 1,644,078 $ 1,645,712 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, equipment and intangibles 258,048 237,654 Amortization of debt discount and issuance costs 3,490 3,294 Deferred income taxes 42,673 18,053 Share-based compensation programs 18,913 18,544 Other 716 1,803 Changes in operating assets and liabilities: Accounts receivable (69,965 ) (56,743 ) Inventory (450,991 ) 6,420 Accounts payable 878,501 424,710 Income taxes payable 73,853 141,273 Other (46,296 ) 124,607 Net cash provided by operating activities 2,353,020 2,565,327 Investing activities: Purchases of property and equipment (388,820 ) (340,687 ) Proceeds from sale of property and equipment 10,829 6,643 Investment in tax credit equity investments (5,262 ) (1,795 ) Other (448 ) (1,897 ) Net cash used in investing activities (383,701 ) (337,736 ) 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 ) (300,000 ) Payment of debt issuance costs (6,442 ) (3,404 ) Repurchases of common stock (2,861,557 ) (2,007,161 ) Net proceeds from issuance of common stock 56,575 67,361 Other (350 ) (313 ) Net cash used in financing activities (2,264,460 ) (2,243,517 ) Effect of exchange rate changes on cash 88 (412 ) Net decrease in cash and cash equivalents (295,053 ) (16,338 ) Cash and cash equivalents at beginning of the period 362,113 465,640 Cash and cash equivalents at end of the period $ 67,060 $ 449,302 Supplemental disclosures of cash flow information: Income taxes paid $ 392,490 $ 333,360 Interest paid, net of capitalized interest 99,674 107,971 O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
(Unaudited)For the Twelve Months Ended September 30, Adjusted Debt to EBITDAR: 2022 2021 (In thousands, except adjusted debt to EBITDAR ratio) GAAP debt $ 4,370,772 $ 3,826,073 Add: Letters of credit 101,741 83,985 Discount on senior notes 6,481 4,531 Debt issuance costs 22,747 19,396 Six-times rent expense 2,318,454 2,206,056 Adjusted debt $ 6,820,195 $ 6,140,041 GAAP net income $ 2,163,051 $ 2,038,657 Add: Interest expense 150,121 148,385 Provision for income taxes 633,581 598,962 Depreciation and amortization 348,611 320,779 Share-based compensation expense 25,025 24,229 Rent expense(i) 386,409 367,676 EBITDAR $ 3,706,798 $ 3,498,688 Adjusted debt to EBITDAR 1.84 1.75 (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 September 30, 2022 and 2021 (in thousands): Total lease cost, per ASC 842, for the twelve months ended September 30, 2022 $ 460,299 Less: Variable non-contract operating lease components, related to property taxes and insurance, for the twelve months ended September 30, 2022 73,890 Rent expense for the twelve months ended September 30, 2022 $ 386,409 Total lease cost, per ASC 842, for the twelve months ended September 30, 2021 $ 438,205 Less: Variable non-contract operating lease components, related to property taxes and insurance, for the twelve months ended September 30, 2021 70,529 Rent expense for the twelve months ended September 30, 2021 $ 367,676 September 30, 2022 2021 Selected Balance Sheet Ratios: Inventory turnover(1) 1.7 1.7 Average inventory per store (in thousands)(2) $ 697 $ 633 Accounts payable to inventory(3) 134.7 % 126.4 % For the Three Months Ended For the Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Reconciliation of Free Cash Flow (in thousands): Net cash provided by operating activities $ 961,047 $ 852,495 $ 2,353,020 $ 2,565,327 Less: Capital expenditures 159,899 118,080 388,820 340,687 Excess tax benefit from share-based compensation payments 8,481 12,141 14,300 28,956 Investment in tax credit equity investments 1,182 27 5,262 1,795 Free cash flow $ 791,485 $ 722,247 $ 1,944,638 $ 2,193,889 For the Three Months Ended For the Nine Months Ended For the Twelve Months Ended September 30, September 30, September 30, 2022 2021 2022 2021 2022 2021 Store Count: Beginning domestic store count 5,873 5,710 5,759 5,594 5,740 5,592 New stores opened 38 30 153 148 172 153 Stores closed (1 ) — (2 ) (2 ) (2 ) (5 ) Ending domestic store count 5,910 5,740 5,910 5,740 5,910 5,740 Beginning Mexico store count 27 22 25 22 22 21 New stores opened 1 — 3 — 6 1 Ending Mexico store count 28 22 28 22 28 22 Total ending store count 5,938 5,762 5,938 5,762 5,938 5,762 For the Three Months Ended For the Twelve Months Ended September 30, September 30, 2022 2021 2022 2021 Store and Team Member Information:(4) Total employment 84,050 80,536 Square footage (in thousands) 44,373 43,035 Sales per weighted-average square foot(5) $ 84.54 $ 79.73 $ 316.37 $ 299.31 Sales per weighted-average store (in thousands)(6) $ 634 $ 597 $ 2,373 $ 2,231 (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. 
