O’Reilly Automotive, Inc. Reports Third Quarter 2022 Results


  •  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.