10-QPeriod: Q1 FY2020

O REILLY AUTOMOTIVE INC Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 8, 2020For Securities:ORLY

Summary

O'Reilly Automotive, Inc. (ORLY) reported its first-quarter 2020 results, a period significantly impacted by the onset of the COVID-19 pandemic in mid-March. Despite a challenging environment, the company demonstrated resilience, with sales increasing by 3% to $2.48 billion compared to the prior year. This growth was driven by the addition of new stores and the acquisition of Mayasa, though comparable store sales experienced a slight decline of 1.9% due to the impact of stay-at-home orders. Net income for the quarter was $300.4 million, a decrease from $321.2 million in the prior year, resulting in diluted earnings per share of $3.97, down from $4.05. The company proactively managed its liquidity by drawing down on its revolving credit facility, issuing new senior notes, and temporarily suspending its share repurchase program. O'Reilly was deemed an essential service provider, allowing its stores to remain operational while implementing safety measures and modified operating hours to serve customer needs during the crisis.

Financial Highlights

45 data points
Beta

Revenue

$2.48B

52.3% Gross Margin

Net Income

$300.44M

12.1% Net Margin

EPS (Diluted)

$0.26

Total Assets

$11.11B

Cash & Equivalents

$287.07M

Free Cash Flow

$325.81M

Financial Statements
Beta
Revenue$2.48B
Cost of Revenue$1.18B
Gross Profit$1.30B
SG&A Expenses$872.35M
Operating Income$423.56M
Interest Expense$39.39M
Net Income$300.44M
EPS (Basic)$0.27
EPS (Diluted)$0.26
Shares Outstanding (Basic)1.13B
Shares Outstanding (Diluted)1.13B

Key Highlights

  • 1Total sales increased by 3.0% to $2.48 billion for the three months ended March 31, 2020, compared to $2.41 billion for the same period in 2019.
  • 2Comparable store sales decreased by 1.9% for the first quarter of 2020, primarily impacted by the onset of COVID-19 measures in mid-March.
  • 3Net income for the quarter was $300.4 million, a decrease of 6.5% from $321.2 million in the prior year.
  • 4Diluted earnings per share (EPS) decreased to $3.97 from $4.05 year-over-year.
  • 5The company reported $459.1 million in cash provided by operating activities, an increase from $440.6 million in the prior year.
  • 6O'Reilly temporarily suspended its share repurchase program on March 16, 2020, to conserve liquidity in response to COVID-19 uncertainties.
  • 7As of March 31, 2020, the company had $287.1 million in cash and cash equivalents, bolstered by $250 million in additional borrowings drawn under its revolving credit facility.

Frequently Asked Questions

The COVID-19 pandemic began to impact O'Reilly's performance significantly in mid-March 2020. While the company was deemed an essential service provider and kept its stores open, stay-at-home orders led to a sharp decrease in transaction counts, particularly for professional service provider customers. This resulted in a negative comparable store sales growth of 1.9% for the quarter, a reversal from the positive growth seen earlier in the period.

O'Reilly took proactive steps to manage liquidity. They drew an additional $250 million on their existing revolving credit facility and issued $500 million in senior notes. Furthermore, the company temporarily suspended its share repurchase program on March 16, 2020, to conserve cash. Despite these measures, cash provided by operating activities increased year-over-year to $459.1 million.

For the three months ended March 31, 2020, sales to do-it-yourself (DIY) customers were $1.345 billion, a slight increase from $1.337 billion in the prior year. Sales to professional service provider customers were $1.070 billion, up from $1.039 billion in the prior year. However, the company noted that transaction counts turned sharply negative for both segments in mid-March due to COVID-19, with a more pronounced impact on the professional segment.

The company stated that it is unable to predict how long the COVID-19 crisis will last or its precise impact on customers and the business. They are continuously making adjustments to navigate the current and expected environment, focusing on health and safety, liquidity, and mitigating operational impacts. The long-term demand drivers in the automotive aftermarket, such as the age of the vehicle fleet and miles driven, remain supportive, but near-term performance is subject to significant uncertainty.