10-QPeriod: Q2 FY2020

O REILLY AUTOMOTIVE INC Quarterly Report for Q2 Ended Jun 30, 2020

Filed August 7, 2020For Securities:ORLY

Summary

O'Reilly Automotive, Inc. (ORLY) reported a strong second quarter of 2020, demonstrating resilience and growth despite the ongoing COVID-19 pandemic. Sales increased by a significant 19% year-over-year, driven by robust comparable store sales growth of 16.2%. This performance was supported by factors such as government stimulus payments, consumer investment in existing vehicles, and the company's effective 'dual market strategy' serving both DIY and professional service providers. Profitability also saw substantial improvement, with operating income up 48% and net income increasing by 50%. Diluted earnings per share rose to $7.10, reflecting the strong operational performance. The company's liquidity remains solid, with a substantial increase in cash generated from operations, and management has taken proactive steps to preserve financial flexibility during uncertain times. ORLY's ability to navigate the challenging economic environment and deliver impressive financial results positions it favorably for continued performance.

Financial Highlights

45 data points
Beta

Revenue

$3.09B

53.0% Gross Margin

Net Income

$531.67M

17.2% Net Margin

EPS (Diluted)

$0.47

Total Assets

$11.73B

Cash & Equivalents

$872.42M

Free Cash Flow

$988.80M

Financial Statements
Beta
Revenue$3.09B
Cost of Revenue$1.45B
Gross Profit$1.64B
SG&A Expenses$900.69M
Operating Income$736.49M
Interest Expense$41.72M
Net Income$531.67M
EPS (Basic)$0.48
EPS (Diluted)$0.47
Shares Outstanding (Basic)1.11B
Shares Outstanding (Diluted)1.12B

Key Highlights

  • 1Revenue increased 19% to $3.09 billion for the three months ended June 30, 2020, compared to $2.59 billion in the prior year.
  • 2Comparable store sales grew by an impressive 16.2% for the second quarter of 2020.
  • 3Operating income surged by 48% to $736 million, indicating strong operational leverage and cost management.
  • 4Net income rose by 50% to $532 million, with diluted EPS reaching $7.10, up from $4.51 in the prior year.
  • 5The company generated $1.56 billion in net cash from operating activities for the first six months of 2020, a significant increase from $847 million in the prior year.
  • 6O'Reilly successfully navigated the COVID-19 pandemic, benefiting from government stimulus and consumers investing in their vehicles, leading to strong demand.
  • 7The company maintained strong liquidity and ended the period with $872.4 million in cash and cash equivalents.

Frequently Asked Questions

O'Reilly Automotive reported strong financial results for the second quarter of 2020, with a 19% increase in sales to $3.09 billion and a 50% rise in net income to $532 million. Comparable store sales grew by an impressive 16.2%. The company attributed this strong performance to government stimulus, consumers prioritizing vehicle maintenance, and its effective dual market strategy.

While the pandemic initially caused sales headwinds in March and April, O'Reilly deemed itself an essential service and remained operational. Management implemented health and safety measures, temporarily adjusted store hours, and took steps to strengthen liquidity. The company ultimately benefited from government stimulus and a consumer trend to invest in existing vehicles, leading to a strong recovery through May and June. Share repurchases were temporarily suspended but resumed in late May.

The company's liquidity remains robust. Net cash provided by operating activities for the first six months of 2020 was $1.56 billion, a substantial increase from the prior year. O'Reilly ended the quarter with $872.4 million in cash and cash equivalents and had no outstanding borrowings under its revolving credit facility as of June 30, 2020. The company also remains in compliance with its debt covenants.

Management acknowledges the ongoing uncertainty related to the COVID-19 pandemic and its potential impact on future demand and economic conditions. However, the company's strong performance in Q2, driven by underlying industry dynamics like an aging vehicle fleet and consumer focus on maintenance, provides a positive outlook. The company continues to monitor business conditions and make necessary adjustments.