10-QPeriod: Q1 FY2022

O REILLY AUTOMOTIVE INC Quarterly Report for Q1 Ended Mar 31, 2022

Filed May 9, 2022For Securities:ORLY

Summary

O'Reilly Automotive, Inc. (ORLY) reported its first quarter 2022 results, showing a 7% increase in sales to $3.30 billion, driven by a 4.8% rise in comparable store sales. While total sales grew, net income saw a slight decrease of 4% to $481.9 million, or $7.17 per diluted share, compared to the prior year. This was influenced by a lower gross profit margin, partly due to strategic pricing initiatives for professional customers, and increased selling, general, and administrative expenses stemming from inflationary pressures and higher payroll costs. The company continued its store expansion, opening 54 net new stores during the quarter. Despite the dip in net income, O'Reilly demonstrated strong cash flow generation, with operating activities providing $690 million. The company also actively returned capital to shareholders, repurchasing $775 million worth of common stock in the quarter, underscoring its commitment to shareholder value. The balance sheet remains solid, with ample liquidity and compliance with all debt covenants, positioning the company to navigate the current economic environment and pursue its growth strategy.

Financial Highlights

46 data points
Beta

Revenue

$3.30B

51.8% Gross Margin

Net Income

$481.88M

14.6% Net Margin

EPS (Diluted)

$0.48

Total Assets

$11.76B

Cash & Equivalents

$191.55M

Free Cash Flow

$585.90M

Financial Statements
Beta
Revenue$3.30B
Cost of Revenue$1.59B
Gross Profit$1.71B
SG&A Expenses$1.04B
Operating Income$669.53M
Interest Expense$34.84M
Net Income$481.88M
EPS (Basic)$0.48
EPS (Diluted)$0.48
Shares Outstanding (Basic)998.58M
Shares Outstanding (Diluted)1.01B

Key Highlights

  • 1Total sales increased by 7% to $3.30 billion, with comparable store sales growing by 4.8%.
  • 2Net income decreased by 4% to $481.9 million, resulting in diluted EPS of $7.17.
  • 3Gross profit margin declined to 51.8% from 53.1% due to a shift in sales mix towards professional customers and pricing initiatives.
  • 4Selling, general, and administrative (SG&A) expenses increased by 9%, impacted by wage, fuel, and payroll cost inflation.
  • 5The company opened 54 net new stores during the quarter, continuing its expansion strategy.
  • 6Strong operating cash flow of $690 million was generated.
  • 7Significant share repurchases totaling $775 million were executed during the quarter.

Frequently Asked Questions

Total sales increased by 7% to $3.30 billion, primarily driven by comparable store sales growth of 4.8% and the addition of new stores. The decrease in net income was due to a lower gross profit margin, impacted by a strategic pricing initiative for professional customers which carry a lower margin, and higher operating expenses related to wage inflation and increased payroll. These factors offset the top-line growth.

O'Reilly is experiencing inflationary pressures on wages, benefits, and fuel costs, which have increased SG&A expenses. While the company has historically passed on merchandise cost increases through higher selling prices, the current environment requires careful management. The company's strategy includes leveraging supplier programs, economies of scale, and selective forward buying to mitigate merchandise cost increases, and adjusting selling prices where possible.

O'Reilly has a robust share repurchase program and actively deploys capital to return value to shareholders. In the first quarter of 2022, the company repurchased approximately $775 million of its common stock. As of March 31, 2022, $1.2 billion remained under its share repurchase authorization, indicating continued commitment to this strategy.

Yes, O'Reilly's financial health appears strong. The company generated significant operating cash flow and maintained ample liquidity. Importantly, it was in compliance with all debt covenants related to its senior notes and credit agreement as of March 31, 2022. The company's fixed charge coverage ratio was 6.93x, and its leverage ratio was 1.62x, both well within the required limits.