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

Rhea-AI Summary

O'Reilly Automotive reported a strong third quarter ending September 30, 2022, with a 7.6% increase in comparable store sales and a record $3.80 billion in revenue, up 9% year-over-year. Diluted earnings per share rose 14% to $9.17. Year-to-date, the company opened 154 new stores and anticipates reaching 180 new store openings in 2023. Despite a 5% decline in net income for the first nine months, the company maintains an optimistic outlook, with updated full-year guidance projecting $14.1 billion to $14.3 billion in total revenue.

Positive

• 7.6% increase in comparable store sales for Q3.
• Record revenue of $3.80 billion in Q3, a 9% increase YOY.
• 14% increase in diluted earnings per share to $9.17.
• Opened 154 new stores year-to-date, on track for 180 new openings in 2023.

Negative

• Net income declined by $2 million to $1.64 billion for the first nine months.
• Gross profit as a percentage of sales decreased from 52.7% to 51.3% for nine months.

•  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.

3^rd 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.

3^rd 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.

FAQ

What was the comparable store sales growth for O'Reilly Automotive in Q3 2022?

O'Reilly Automotive reported a 7.6% increase in comparable store sales for Q3 2022.

What is the diluted earnings per share for O'Reilly Automotive in Q3 2022?

The diluted earnings per share for O'Reilly Automotive in Q3 2022 increased 14% to $9.17.

How much revenue did O'Reilly Automotive generate in Q3 2022?

O'Reilly Automotive generated $3.80 billion in revenue for Q3 2022, a 9% year-over-year increase.

How many stores did O'Reilly Automotive open in 2022?

O'Reilly Automotive opened 154 new stores across the U.S. and Mexico year-to-date 2022.

What is the updated full-year revenue guidance for O'Reilly Automotive in 2022?

O'Reilly Automotive updated its full-year revenue guidance to $14.1 billion to $14.3 billion.