10-QPeriod: Q1 FY2024

O REILLY AUTOMOTIVE INC Quarterly Report for Q1 Ended Mar 31, 2024

Filed May 9, 2024For Securities:ORLY

Summary

O'Reilly Automotive, Inc. (ORLY) reported solid results for the first quarter of 2024, demonstrating continued growth in a resilient market. Total sales increased by 7% year-over-year, driven by a 3.4% increase in comparable store sales and the strategic acquisition of Vast Auto, which expanded its presence into Canada. The company's dual-market strategy, serving both do-it-yourself (DIY) and professional service provider customers, remains a key strength, with both segments contributing to an increase in average ticket values. Despite inflationary pressures impacting acquisition costs, O'Reilly managed to improve its gross profit margin slightly due to improved cost management and the benefits of scale. While selling, general, and administrative expenses (SG&A) increased due to investments in store count growth, fleet modernization, and IT, operating income still grew by 5%. Net income saw a 6% increase, translating to diluted earnings per share of $9.20, an 11% rise compared to the prior year. The company maintained a strong liquidity position, with healthy cash flow from operations, although investing activities were impacted by the Vast Auto acquisition. Shareholder returns remain a priority, with the company continuing its share repurchase program, though at a moderated pace compared to the previous year.

Financial Highlights

46 data points
Beta

Revenue

$3.98B

51.2% Gross Margin

Net Income

$547.24M

13.8% Net Margin

EPS (Diluted)

$0.61

Total Assets

$14.21B

Cash & Equivalents

$89.26M

Free Cash Flow

$454.98M

Financial Statements
Beta
Revenue$3.98B
Cost of Revenue$1.94B
Gross Profit$2.03B
SG&A Expenses$1.28B
Operating Income$752.48M
Interest Expense$57.15M
Net Income$547.24M
EPS (Basic)$0.62
EPS (Diluted)$0.61
Shares Outstanding (Basic)885.25M
Shares Outstanding (Diluted)891.81M

Key Highlights

  • 1Total sales increased by 7% to $3.98 billion for the first quarter of 2024.
  • 2Comparable store sales grew by 3.4%, indicating steady performance in existing locations.
  • 3Acquisition of Vast Auto marked entry into the Canadian market, adding 23 stores.
  • 4Net income rose by 6% to $547 million, with diluted EPS increasing 11% to $9.20.
  • 5Gross profit margin improved slightly to 51.2% from 51.0% due to better acquisition costs and scale.
  • 6Operating income increased by 5% to $752 million, reflecting solid operational execution.
  • 7Company maintained compliance with debt covenants and reported a leverage ratio of 1.84x.

Frequently Asked Questions

The acquisition of Vast Auto, completed in January 2024, marked O'Reilly's entry into the Canadian market. It contributed $73 million in sales from new stores opened in 2023 and 2024 (including Vast Auto), and was included in the overall sales growth. While the acquisition added to operating expenses and initial integration costs, management noted that Vast Auto's results were not material enough to require pro forma financial statements. The acquisition is part of the company's strategy to expand its geographic footprint.

O'Reilly experienced an increase in acquisition costs due to inflationary pressures. However, the company managed to improve its gross profit margin slightly to 51.2% from 51.0%. This improvement was primarily attributed to better acquisition costs, the benefits of economies of scale from increased purchase volumes, and selective forward buying. The company also noted its historical ability to pass on cost increases through higher selling prices for affected products.

O'Reilly continues to execute an aggressive new store opening strategy. The company opened 37 net new stores in the first quarter of 2024 and anticipates opening between 190 to 200 net new stores for the full year 2024. This expansion, coupled with the acquisition in Canada, is a key component of their growth strategy.

O'Reilly has an active share repurchase program. In the first quarter of 2024, the company repurchased 0.262 million shares for a total investment of $270 million. This is a reduction compared to the $1.11 billion repurchased in the same period of 2023. As of March 31, 2024, the company had approximately $2.3 billion remaining under its share repurchase authorization, indicating continued commitment to returning capital to shareholders.