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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.
