O’Reilly Automotive(ORLY) - 2024 Q3 - Quarterly Results

Executive Summary & Management Commentary Third Quarter 2024 Overview O'Reilly Automotive, Inc. reported record Q3 2024 revenue and earnings, with comparable store sales up 1.5% and strong professional business growth - Comparable store sales increased 1.5% in Q3 2024, despite consumer pressures and soft demand in both professional and DIY segments. This builds on 8.7% and 7.6% increases in Q3 of the last two years[2] - The professional business achieved another strong quarter of sales growth, indicating continued market share gains[2] | Metric | Q3 2024 (Millions) | Q3 2023 (Millions) | Change (%) | | :-------------------------- | :----------------- | :----------------- | :--------- | | Sales | $4,364 | $4,203 | 4% | | Gross Profit | $2,251 (51.6% of sales) | $2,160 (51.4% of sales) | 4% | | SG&A Expenses | $1,354 (31.0% of sales) | $1,263 (30.1% of sales) | 7% | | Operating Income | $897 (20.5% of sales) | $897 (21.3% of sales) | 0% | | Net Income | $665 (15.2% of sales) | $650 (15.5% of sales) | 2% | | Diluted EPS | $11.41 | $10.72 | 6% | | Shares Outstanding (Diluted)| 58 million | 61 million | -5% | Year-to-Date 2024 Overview For the first nine months of 2024, O'Reilly Automotive, Inc. achieved 5% sales growth and 7% diluted EPS growth, tightening full-year comparable store sales guidance - Full-year comparable store sales guidance was tightened from 2.0%-4.0% to 2.0%-3.0% to reflect year-to-date performance and future expectations[4] | Metric | YTD 2024 (Millions) | YTD 2023 (Millions) | Change (%) | | :-------------------------- | :------------------ | :------------------ | :--------- | | Sales | $12,610 | $11,980 | 5% | | Gross Profit | $6,450 (51.2% of sales) | $6,140 (51.2% of sales) | 5% | | SG&A Expenses | $3,940 (31.2% of sales) | $3,670 (30.6% of sales) | 7% | | Operating Income | $2,510 (19.9% of sales) | $2,470 (20.6% of sales) | 2% | | Net Income | $1,840 (14.6% of sales) | $1,790 (15.0% of sales) | 2% | | Diluted EPS | $31.14 | $29.20 | 7% | | Shares Outstanding (Diluted)| 59 million | 61 million | -3% | Comparable Store Sales Performance Comparable store sales for O'Reilly Automotive, Inc. grew 1.5% in Q3 2024 and 2.4% year-to-date, building on strong prior-year performance - Comparable store sales definition includes U.S. stores open at least one year, online ship-to-home, and pick-up-in-store orders, excluding specialty machinery, sales to independent parts stores, Team Members, and Leap Day sales[6] | Period | Comparable Store Sales Growth | | :---------- | :---------------------------- | | Q3 2024 | 1.5% (on top of 8.7% in Q3 2023) | | YTD 2024 | 2.4% (on top of 9.4% in YTD 2023) | Share Repurchase Program The Company invested $541 million in Q3 2024 and $1.60 billion year-to-date in share repurchases, with $898 million remaining under authorization | Period | Shares Repurchased (Millions) | Average Price Per Share | Total Investment (Millions) | | :-------------------------------------- | :---------------------------- | :---------------------- | :-------------------------- | | Q3 2024 | 0.5 | $1,084.28 | $541 | | YTD 2024 | 1.5 | $1,038.32 | $1,600 | | Subsequent to Q3 2024 (through release) | 0.1 | $1,170.55 | $70 | | Program Inception (Jan 2011) to Date | 95.7 | $259.72 | $24,850 | - Excise tax on shares repurchased for the nine months ended September 30, 2024, was $16.0 million[7] - Approximately $898 million remained under the current share repurchase authorization as of the release date[7] Updated Full-Year 2024 Guidance Financial Guidance O'Reilly Automotive, Inc. updated its full-year 2024 financial guidance, tightening comparable store sales and providing ranges for key financial metrics | Metric | Full-Year 2024 Guidance | | :------------------------------------ | :---------------------- | | Net, new store openings | 190 to 200 | | Comparable store sales | 2.0% to 3.0% | | Total revenue | $16.6 billion to $16.8 billion | | Gross profit as a percentage of sales | 51.0% to 51.5% | | Operating income as a percentage of sales | 19.4% to 19.9% | | Effective income tax rate | 21.8% | | Diluted earnings per share | $40.60 to $41.10 | | Net cash provided by operating activities | $2.7 billion to $3.1 billion | | Capital expenditures | $900 million to $1.0 billion | | Free cash flow | $1.8 billion to $2.1 billion | Free Cash Flow Reconciliation The company provided a reconciliation of its non-GAAP free cash flow guidance to the most directly comparable GAAP measure, net cash provided by operating activities | (in millions) | For the Year Ending December 31, 2024 | | :------------------------------------------------ | :------------------------------------ | | Net cash provided by operating activities | $2,730 to $3,140 | | Less: Capital expenditures | 900 to 1,000 | | Less: Excess tax benefit from share-based compensation payments | 30 to 40 | | Free cash flow | $1,800 to $2,100 | Company Information & Disclosures About O'Reilly Automotive, Inc. O'Reilly Automotive, Inc. is a leading automotive aftermarket retailer, serving DIY and professional markets with 6,291 stores across North America - O'Reilly Automotive, Inc. is a leading specialty retailer in the automotive aftermarket industry, serving both DIY and professional markets[12] - As of September 30, 2024, the Company operated 6,291 stores across 48 U.S. states, Puerto Rico, Mexico, and Canada[12] Non-GAAP Information The release presents non-GAAP financial measures, including adjusted debt to EBITDAR and free cash flow, as supplemental information for investors - Non-GAAP financial measures, including adjusted debt to EBITDAR and free cash flow, are presented as supplemental information, not as substitutes for GAAP measures[10] - The Company believes these non-GAAP measures are indicative of its core operations and provide meaningful supplemental information[10] Earnings Conference Call Information O'Reilly Automotive, Inc. will host a conference call on October 24, 2024, to discuss results and future expectations, with live and replay access details provided - A conference call to discuss results and future expectations will be held on Thursday, October 24, 2024, at 10:00 a.m. Central Time[11] - Investors can listen live on the Company's website (www.OReillyAuto.com) or join via dial-in (888) 506-0062, conference ID 560004. A replay will be available until October 23, 2025[11] Forward-Looking Statements The document contains forward-looking statements based on estimates and assumptions, subject to various risks and uncertainties that could cause actual results to differ materially - Statements discussing expected growth, store development, business strategies, future revenues, and performance are forward-looking and subject to risks and uncertainties[13] - Key risks include the economy, inflation, consumer debt, product demand, competition, supply chain disruptions, and governmental regulations[13] - The Company claims safe-harbor protection and undertakes no obligation to publicly update these statements, except as required by law[13] Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets The condensed consolidated balance sheets provide a snapshot of the Company's financial position as of September 30, 2024, compared to prior periods, detailing assets, liabilities, and shareholders' equity | (In thousands) | Sep 30, 2024 | Sep 30, 2023 | Dec 31, 2023 | | :---------------------------------- | :----------- | :----------- | :----------- | | Assets | | | | | Total current assets | $5,698,287 | $5,377,712 | $5,558,302 | | Net property and equipment | $5,436,382 | $4,888,177 | $5,036,980 | | Operating lease, right-of-use assets| $2,269,929 | $2,213,884 | $2,200,554 | | Goodwill | $997,226 | $895,399 | $897,696 | | Total assets | $14,577,522 | $13,551,838 | $13,872,995 | | Liabilities & Equity | | | | | Total current liabilities | $8,185,165 | $7,831,082 | $7,661,353 | | Long-term debt | $5,359,810 | $5,102,350 | $5,570,125 | | Operating lease liabilities, less current portion | $1,938,162 | $1,895,991 | $1,881,344 | | Total shareholders' deficit | $(1,439,064) | $(1,760,469) | $(1,739,278) | Condensed Consolidated Statements of Income The condensed consolidated statements of income present the Company's revenues, expenses, and net income for Q3 and YTD 2024, compared to the same periods in 2023 | (In thousands, except per share data) | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :------------------------------------ | :----------- | :----------- | :----------- | :----------- | | Sales | $4,364,437 | $4,203,380 | $12,612,878 | $11,980,235 | | Cost of goods sold | $2,113,212 | $2,042,917 | $6,159,421 | $5,842,861 | | Gross profit | $2,251,225 | $2,160,463 | $6,453,457 | $6,137,374 | | Selling, general and administrative expenses | $1,354,497 | $1,263,241 | $3,940,950 | $3,669,734 | | Operating income | $896,728 | $897,222 | $2,512,507 | $2,467,640 | | Income before income taxes | $847,921 | $846,667 | $2,359,867 | $2,333,219 | | Provision for income taxes | $182,457 | $196,840 | $524,317 | $539,142 | | Net income | $665,464 | $649,827 | $1,835,550 | $1,794,077 | | Diluted earnings per share | $11.41 | $10.72 | $31.14 | $29.20 | Condensed Consolidated Statements of Cash Flows The condensed consolidated statements of cash flows detail cash generated from operating, investing, and financing activities for YTD 2024 and 2023, showing a net decrease in cash for 2024 | (In thousands) | YTD 2024 | YTD 2023 | | :-------------------------------------------- | :----------- | :----------- | | Net cash provided by operating activities | $2,425,089 | $2,517,655 | | Net cash used in investing activities | $(883,608) | $(749,773) | | Net cash used in financing activities | $(1,704,093) | $(1,794,694) | | Net decrease in cash and cash equivalents | $(163,519) | $(25,919) | | Cash and cash equivalents at end of the period| $115,613 | $82,664 | - Significant financing activities in YTD 2024 included proceeds from long-term debt ($498.9 million) and repurchases of common stock ($1.60 billion)[18] Supplemental Financial Data Adjusted Debt to EBITDAR The Company's adjusted debt to EBITDAR ratio increased slightly to 1.96 for the twelve months ended September 30, 2024, from 1.93 in the prior year | (In thousands, except ratio) | For the Twelve Months Ended Sep 30, 2024 | For the Twelve Months Ended Sep 30, 2023 | | :--------------------------- | :--------------------------------------- | :--------------------------------------- | | GAAP debt | $5,359,810 | $5,102,350 | | Adjusted debt | $8,182,230 | $7,749,660 | | EBITDAR | $4,177,822 | $4,011,266 | | Adjusted debt to EBITDAR | 1.96 | 1.93 | Selected Balance Sheet Ratios Key balance sheet ratios for September 30, 2024, show stable inventory turnover, increased average inventory per store, and decreased accounts payable to inventory ratio | Metric | Sep 30, 2024 | Sep 30, 2023 | | :---------------------------- | :----------- | :----------- | | Inventory turnover | 1.7 | 1.7 | | Average inventory per store (in thousands) | $781 | $758 | | Accounts payable to inventory | 129.4% | 133.9% | Revenue Disaggregation Revenue disaggregation details the Company's sales breakdown between DIY customers, professional service providers, and other sales for Q3 and YTD periods | (in thousands) | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :------------------------------------------------- | :----------- | :----------- | :----------- | :----------- | | Sales to do-it-yourself customers | $2,215,640 | $2,206,511 | $6,366,670 | $6,254,980 | | Sales to professional service provider customers | $2,032,376 | $1,914,884 | $5,901,820 | $5,480,212 | | Other sales, sales adjustments, and Vast Auto stores | $116,421 | $81,985 | $344,388 | $245,043 | | Total sales | $4,364,437 | $4,203,380 | $12,612,878 | $11,980,235 | Store and Team Member Information The Company's store count increased across all operations to 6,291 stores as of September 30, 2024, alongside growth in employment and square footage | Store Count (as of Sep 30) | 2024 | 2023 | | :------------------------- | :---- | :---- | | Ending domestic store count| 6,187 | 6,063 | | Ending Mexico store count | 78 | 48 | | Ending Canada store count | 26 | — | | Total ending store count | 6,291 | 6,111 | | Metric (as of Sep 30) | 2024 | 2023 | | :-------------------------------- | :---------- | :---------- | | Total employment | 92,709 | 90,910 | | Square footage (in thousands) | 47,949 | 46,258 | | Sales per weighted-average square foot (Q3) | $89.17 | $89.99 | | Sales per weighted-average store (in thousands) (Q3) | $689 | $683 |