O’Reilly Automotive, Inc. Reports Second Quarter 2023 Results

O'Reilly Automotive, Inc.

• 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.

2^nd 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.”

2^nd 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.