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

  • First quarter comparable store sales growth of 4.8%, two-year stack increase of 29.6%
  • 34.4% two-year compounded growth in first quarter diluted earnings per share
  • CFO transition plan announced

SPRINGFIELD, Mo., April 27, 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 for its first quarter ended March 31, 2022, and announced the transition plan for Tom McFall, Executive Vice President and CFO.

1st Quarter Financial Results
Greg Johnson, O’Reilly’s President and CEO, commented, “We are pleased to report another profitable quarter, highlighted by a 4.8% increase in comparable store sales, which is on top of the record 24.8% comparable store sales growth we delivered in the first quarter last year, resulting in an incredible comparable store sales two-year stacked increase of 29.6%. Historically, our first quarter can be volatile, as we see weather impacts from winter conditions early in the quarter and the timing of the onset of spring at the end. This year was no exception, and we saw choppiness in our business that coincided with inclement weather at the beginning of our quarter and the slow start to spring, along with other macroeconomic pressures. However, we continue to be pleased with the core, underlying strength of our business and our solid first quarter comparable store sales results, which, on top of last year’s performance, are clear indicators of our Team’s ability to grow our business and take market share. During the quarter, we launched our professional pricing initiative, which created the expected pressure on gross profit, and our Teams continue to effectively manage the ongoing inflationary cost pressures. I would like to thank each of our over 84,000 Team Members in the U.S. and Mexico for their relentless focus on providing unsurpassed levels of customer service, and their ongoing efforts continue to drive profitable growth.”

Sales for the first quarter ended March 31, 2022, increased $205 million, or 7%, to $3.30 billion from $3.09 billion for the same period one year ago. Gross profit for the first quarter increased 4% to $1.71 billion (or 51.8% of sales) from $1.64 billion (or 53.1% of sales) for the same period one year ago. Selling, general and administrative expenses (“SG&A”) for the first quarter increased 9% to $1.04 billion (or 31.5% of sales) from $950 million (or 30.7% of sales) for the same period one year ago. Operating income for the first quarter decreased 3% to $670 million (or 20.3% of sales) from $691 million (or 22.4% of sales) for the same period one year ago.

Net income for the first quarter ended March 31, 2022, decreased $20 million, or 4%, to $482 million (or 14.6% of sales) from $502 million (or 16.2% of sales) for the same period one year ago. Diluted earnings per common share for the first quarter increased 2% to $7.17 on 67 million shares versus $7.06 on 71 million shares for the same period one year ago.

1st 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 4.8% for the first quarter ended March 31, 2022, on top of 24.8% for the same period one year ago.

Share Repurchase Program
During the first quarter ended March 31, 2022, the Company repurchased 1.2 million shares of its common stock, at an average price per share of $664.15, for a total investment of $775 million. Subsequent to the end of the first 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 $694.70, for a total investment of $106 million. The Company has repurchased a total of 86.9 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 $202.88, for a total aggregate investment of $17.63 billion. As of the date of this release, the Company had approximately $1.12 billion remaining under its current share repurchase authorization.

Full-Year 2022 Guidance
The table below outlines the Company’s unchanged guidance for selected full-year 2022 financial data:

    For the Year Ending
    December 31, 2022
Comparable store sales   5% to 7%
Total revenue   $14.2 billion to $14.5 billion
Gross profit as a percentage of sales   50.8% to 51.3%
Operating income as a percentage of sales   20.6% to 21.1%
Effective income tax rate   23.2%
Diluted earnings per share(1)   $32.35 to $32.85
Net cash provided by operating activities   $2.1 billion to $2.5 billion
Capital expenditures   $650 million to $750 million
Free cash flow(2)   $1.3 billion to $1.6 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   $ 2,080   to   $ 2,500
  Less: Capital expenditures     650   to     750
    Excess tax benefit from share-based compensation payments     10   to     20
    Investment in tax credit equity investments     120   to     130
  Free cash flow   $ 1,300   to   $ 1,600
                   

Executive Leadership Transition
Effective May 9, 2022, Tom McFall, O’Reilly’s Executive Vice President and Chief Financial Officer, will step down as Chief Financial Officer and continue his employment with the Company in the role of Executive Vice President, and at that time, Jeremy Fletcher, O’Reilly’s Senior Vice President of Finance and Controller, will be promoted to the position of Executive Vice President and Chief Financial Officer.

“After 16 years of dedicated service, Tom has communicated his desire to transition into a different role with the Company,” Mr. Johnson stated. “Tom has provided exceptional leadership to our Company since joining Team O’Reilly in 2006, and we are pleased he will continue to provide valuable guidance and mentorship as he shifts to this new role. Tom will retain his existing responsibilities in the areas of Information Technology, Real Estate, Legal and Risk Management, and will continue to provide key strategic and executive leadership. Succession planning has always been an important component of our Culture, and Tom has done an extraordinary job preparing Jeremy for his new role.”

Mr. McFall commented, “It has been a privilege to have been a part of our success over the past 16 years, and I am very excited to continue my career with O’Reilly in a different role. Our consistent and profitable growth is the result of our Team working together and continually striving for the next level of success. During my entire tenure as CFO, Jeremy and I have worked very closely together, and he has been a trusted partner and advisor. I am highly confident in his ability to successfully transition into his new role and, along with our long-tenured executive management team, build on the Company’s impressive record of 29 consecutive years of comparable stores sales growth and record operating income.”

About Jeremy Fletcher
Mr. Fletcher, age 45, has been an O’Reilly Team Member for 16 years. Upon joining the Company in 2005, Mr. Fletcher served as Financial Reporting and Budgeting Manager and progressed through the roles of Director of Finance, Vice President of Finance and Controller and has served in his current role as Senior Vice President of Finance and Controller for over five years. Prior to joining O’Reilly, Mr. Fletcher worked as a Certified Public Accountant in public practice and in a financial reporting and planning role for a Fortune 1000 corporation. In his new role as Executive Vice President and Chief Financial Officer, Mr. Fletcher will assume full responsibility for all Finance, Accounting and Treasury functions for the Company.

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, April 28, 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 11611896#. A replay of the conference call will be available on the Company’s website through Thursday, April 27, 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 March 31, 2022, the Company operated 5,811 stores in 47 U.S. states and 27 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)

                   
    March 31, 2022   March 31, 2021   December 31, 2021
    (Unaudited)   (Unaudited)   (Note)
Assets                  
Current assets:                  
Cash and cash equivalents   $ 191,546     $ 610,880     $ 362,113  
Accounts receivable, net     305,358       265,914       272,562  
Amounts receivable from suppliers     99,016       114,697       113,112  
Inventory     3,845,881       3,622,201       3,686,383  
Other current assets     81,580       73,947       70,092  
Total current assets     4,523,381       4,687,639       4,504,262  
                   
Property and equipment, at cost     7,046,707       6,651,068       6,948,038  
Less: accumulated depreciation and amortization     2,810,080       2,538,171       2,734,523  
Net property and equipment     4,236,627       4,112,897       4,213,515  
                   
Operating lease, right-of-use assets     1,976,018       2,041,096       1,982,478  
Goodwill     881,773       879,466       879,340  
Other assets, net     142,590       129,789       139,112  
Total assets   $ 11,760,389     $ 11,850,887     $ 11,718,707  
                   
Liabilities and shareholders’ deficit                  
Current liabilities:                  
Accounts payable   $ 4,943,283     $ 4,318,462     $ 4,695,312  
Self-insurance reserves     137,627       116,628       128,794  
Accrued payroll     93,623       131,927       107,588  
Accrued benefits and withholdings     139,392       195,563       234,872  
Income taxes payable     128,302       155,491        
Current portion of operating lease liabilities     334,884       329,334       337,832  
Other current liabilities     393,762       355,793       370,217  
Current portion of long-term debt           299,880        
Total current liabilities     6,170,873       5,903,078       5,874,615  
                   
Long-term debt     3,827,891       3,824,288       3,826,978  
Operating lease liabilities, less current portion     1,698,787       1,761,732       1,701,757  
Deferred income taxes     180,612       165,396       175,212  
Other liabilities     210,499       203,370       206,568  
                   
Shareholders’ deficit:                  
Common stock, $0.01 par value:                  
Authorized shares – 245,000,000                  
Issued and outstanding shares –                  
65,919,929 as of March 31, 2022,                  
69,734,990 as of March 31, 2021, and                  
67,029,042 as of December 31, 2021     659       697       670  
Additional paid-in capital     1,309,071       1,274,033       1,305,508  
Retained deficit     (1,636,267 )     (1,275,409 )     (1,365,802 )
Accumulated other comprehensive loss     (1,736 )     (6,298 )     (6,799 )
Total shareholders’ deficit     (328,273 )     (6,977 )     (66,423 )
                   
Total liabilities and shareholders’ deficit   $ 11,760,389     $ 11,850,887     $ 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
    March 31,
    2022     2021  
Sales   $ 3,296,011     $ 3,090,899  
Cost of goods sold, including warehouse and distribution expenses     1,587,939       1,450,104  
Gross profit     1,708,072       1,640,795  
             
Selling, general and administrative expenses     1,038,542       949,690  
Operating income     669,530       691,105  
             
Other income (expense):            
Interest expense     (34,841 )     (37,506 )
Interest income     510       537  
Other, net     (1,938 )     1,691  
Total other expense     (36,269 )     (35,278 )
             
Income before income taxes     633,261       655,827  
Provision for income taxes     151,381       154,218  
Net income   $ 481,880     $ 501,609  
             
Earnings per share-basic:            
Earnings per share   $ 7.24     $ 7.13  
Weighted-average common shares outstanding – basic     66,572       70,383  
             
Earnings per share-assuming dilution:            
Earnings per share   $ 7.17     $ 7.06  
Weighted-average common shares outstanding – assuming dilution     67,190       71,015  

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

           
  For the Three Months Ended
  March 31,
  2022     2021  
Operating activities:          
Net income $ 481,880     $ 501,609  
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization of property, equipment and intangibles   82,923       79,757  
Amortization of debt discount and issuance costs   1,102       1,070  
Deferred income taxes   5,031       10,551  
Share-based compensation programs   6,533       6,292  
Other   1,007       920  
Changes in operating assets and liabilities:          
Accounts receivable   (33,678 )     (37,917 )
Inventory   (158,387 )     30,915  
Accounts payable   247,280       134,091  
Income taxes payable   138,228       138,196  
Other   (82,033 )     25,188  
Net cash provided by operating activities   689,886       890,672  
           
Investing activities:          
Purchases of property and equipment   (103,990 )     (94,879 )
Proceeds from sale of property and equipment   3,157       2,097  
Investment in tax credit equity investments   (4,080 )     (6 )
Other   (68 )     (969 )
Net cash used in investing activities   (104,981 )     (93,757 )
           
Financing activities:          
Repurchases of common stock   (775,208 )     (664,548 )
Net proceeds from issuance of common stock   19,939       13,557  
Other   (350 )     (313 )
Net cash used in financing activities   (755,619 )     (651,304 )
           
Effect of exchange rate changes on cash   147       (371 )
Net (decrease) increase in cash and cash equivalents   (170,567 )     145,240  
Cash and cash equivalents at beginning of the period   362,113       465,640  
Cash and cash equivalents at end of the period $ 191,546     $ 610,880  
           
Supplemental disclosures of cash flow information:          
Income taxes paid $ 8,584     $ 5,567  
Interest paid, net of capitalized interest   31,514       37,485  

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
(Unaudited)

               
    For the Twelve Months Ended
    March 31,
Adjusted Debt to EBITDAR:   2022   2021
(In thousands, except adjusted debt to EBITDAR ratio)            
GAAP debt   $ 3,827,891   $ 4,124,168
Add: Letters of credit     139,569     84,045
  Discount on senior notes     4,188     4,892
  Debt issuance costs     17,921     20,940
  Six-times rent expense     2,255,652     2,151,918
Adjusted debt   $ 6,245,221   $ 6,385,963
             
GAAP net income   $ 2,144,956   $ 1,953,473
Add: Interest expense     142,103     159,246
  Provision for income taxes     614,392     589,099
  Depreciation and amortization     331,383     320,429
  Share-based compensation expense     24,897     23,164
  Rent expense(i)     375,942     358,653
EBITDAR   $ 3,633,673   $ 3,404,064
             
Adjusted debt to EBITDAR     1.72     1.88
(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 March 31, 2022 and 2021 (in thousands):
  Total lease cost, per ASC 842, for the twelve months ended March 31, 2022 $ 448,384
  Less:   Variable non-contract operating lease components, related to property taxes and insurance, for the twelve months ended March 31, 2022   72,442
  Rent expense for the twelve months ended March 31, 2022 $ 375,942
           
  Total lease cost, per ASC 842, for the twelve months ended March 31, 2021 $ 426,126
  Less:   Variable non-contract operating lease components, related to property taxes and insurance, for the twelve months ended March 31, 2021   67,473
  Rent expense for the twelve months ended March 31, 2021 $ 358,653
           
  March 31,
  2022   2021
Selected Balance Sheet Ratios:          
Inventory turnover(1)   1.7     1.6
Average inventory per store (in thousands)(2) $ 659   $ 637
Accounts payable to inventory(3)   128.5%     119.2%
               
      For the Three Months Ended
      March 31,
      2022   2021
Reconciliation of Free Cash Flow (in thousands):            
Net cash provided by operating activities   $ 689,886   $ 890,672
Less: Capital expenditures     103,990     94,879
  Excess tax benefit from share-based compensation payments     2,466     6,007
  Investment in tax credit equity investments     4,080     6
Free cash flow   $ 579,350   $ 789,780
                 
    For the Three Months Ended   For the Twelve Months Ended
    March 31,   March 31,
    2022     2021     2022     2021  
Store Count:                
Beginning domestic store count   5,759     5,594     5,660     5,512  
New stores opened   53     68     152     159  
Stores closed   (1 )   (2 )   (1 )   (11 )
Ending domestic store count   5,811     5,660     5,811     5,660  
                 
Beginning Mexico store count   25     22     22     21  
New stores opened   2         5     1  
Ending Mexico store count   27     22     27     22  
                 
Total ending store count   5,838     5,682     5,838     5,682  
                         
    For the Three Months Ended   For the Twelve Months Ended
    March 31,   March 31,
    2022   2021   2022   2021
Store and Team Member Information:(4)                        
Total employment     82,516     77,383            
Square footage (in thousands)     43,603     42,191            
Sales per weighted-average square foot(5)   $ 74.43   $ 72.30   $ 309.40   $ 289.29
Sales per weighted-average store (in thousands)(6)   $ 558   $ 539   $ 2,317   $ 2,152
(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.

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