O’Reilly Automotive(ORLY) - 2025 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for Q1 2025 show a slight decrease in net income to $538.5 million, while total assets grew to $15.3 billion and diluted EPS increased to $9.35 Condensed Consolidated Balance Sheets Total assets reached $15.29 billion as of March 31, 2025, with a shareholders' deficit of $1.36 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $6,029,467 | $5,839,895 | | Total Assets | $15,293,875 | $14,893,741 | | Total Current Liabilities | $8,510,506 | $8,283,505 | | Long-Term Debt | $5,651,821 | $5,520,932 | | Total Shareholders' Deficit | $(1,357,456) | $(1,370,961) | | Total Liabilities and Shareholders' Deficit | $15,293,875 | $14,893,741 | Condensed Consolidated Statements of Income Q1 2025 sales grew 4.0% to $4.14 billion, with net income at $538.5 million and diluted EPS at $9.35 Condensed Consolidated Statements of Income (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Sales | $4,136,924 | $3,976,240 | | Gross Profit | $2,121,485 | $2,034,172 | | Operating Income | $741,466 | $752,481 | | Net Income | $538,485 | $547,238 | | Diluted EPS | $9.35 | $9.20 | Condensed Consolidated Statements of Cash Flows Operating cash flow increased to $755.1 million in Q1 2025, with $559.4 million used for share repurchases Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $755,120 | $704,215 | | Net cash used in investing activities | $(285,003) | $(400,753) | | Net cash used in financing activities | $(409,452) | $(493,578) | | Net increase (decrease) in cash | $61,003 | $(189,868) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, segment reporting, $5.65 billion in long-term debt, and $559.4 million in share repurchases - The company operates as a single reportable segment, the automotive aftermarket parts segment, conducting operations in the U.S., Canada, and Mexico[22] - Total long-term debt stood at $5.65 billion as of March 31, 2025, primarily composed of various senior notes and $329.5 million from its commercial paper program[40] Share Repurchases (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Shares Repurchased (thousands) | 431 | 262 | | Average Price per Share | $1,297.15 | $1,029.24 | | Total Investment (thousands) | $559,428 | $270,017 | Sales by Customer Type (in thousands) | Customer Type | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Do-it-yourself customers | $2,051,859 | $2,003,805 | | Professional service provider customers | $1,998,593 | $1,875,186 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial results, noting a 4% sales increase to $4.14 billion and a decrease in operating income margin to 17.9% - As of March 31, 2025, the company operated 6,298 stores in the U.S. and Puerto Rico, 93 stores in Mexico, and 25 stores in Canada[76] - Comparable store sales increased by 3.6% in Q1 2025, driven by increases in average ticket values for both professional service provider and DIY customers[90][91] - SG&A expenses increased to 33.4% of sales from 32.2% YoY, principally due to enhancements to store level pay plans, inflationary pressures in medical plan costs, and IT investments[94] Results of Operations Q1 2025 sales increased 4% to $4.14 billion, with operating income margin decreasing to 17.9% due to higher SG&A expenses Q1 2025 vs Q1 2024 Performance Summary | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Sales Growth | 4.0% | - | | Comparable Store Sales Growth | 3.6% | 3.4% | | Gross Profit Margin | 51.3% | 51.2% | | SG&A as % of Sales | 33.4% | 32.2% | | Operating Income Margin | 17.9% | 18.9% | | Net Income Margin | 13.0% | 13.8% | | Diluted EPS Growth | 1.6% | - | Liquidity and Capital Resources Q1 2025 operating cash flow was $755.1 million, funding $287.0 million in capital expenditures and $559.4 million in share repurchases Cash Flow and Liquidity (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cash from Operating Activities | $755,120 | $704,215 | | Capital Expenditures | $286,951 | $249,240 | | Free Cash Flow | $455,244 | $438,855 | Debt Covenant Ratios | Ratio | As of March 31, 2025 | As of March 31, 2024 | Covenant Requirement | | :--- | :--- | :--- | :--- | | Consolidated Fixed Charge Coverage | 6.03x | 6.31x | Minimum 2.50:1.00 | | Consolidated Leverage Ratio | 1.92x | 1.84x | Maximum 3.50:1.00 | Quantitative and Qualitative Disclosures about Market Risk The company faces interest rate risk on $329.5 million variable-rate debt and foreign currency risk from Mexican and Canadian operations - The company is subject to interest rate risk on its $329.5 million of outstanding commercial paper, which has a weighted-average variable interest rate of 4.640%[116] - A hypothetical 10% adverse change in exchange rates would result in a potential loss of approximately $33.9 million on net assets in Mexico and $15.1 million in Canada[119][120] Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[123] - There were no changes in the company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[124] PART II - OTHER INFORMATION Legal Proceedings The company is involved in routine litigation, which management does not expect to have a material adverse effect - The company is involved in litigation incidental to the ordinary conduct of its business and accrues for losses when an adverse outcome is probable and reasonably estimable[126] - Management does not currently believe that these legal matters will have a material adverse effect on the company's consolidated financial position, results of operations, or cash flows[126] Risk Factors No material changes to risk factors were reported since the Annual Report on Form 10-K for December 31, 2024 - As of March 31, 2025, there have been no material changes to the risk factors previously set forth in the company's annual report on Form 10-K for the year ended December 31, 2024[127] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales occurred in Q1 2025; 431,000 shares were repurchased for approximately $559.4 million Share Repurchases in Q1 2025 (in thousands, except per share data) | Period | Total Shares Purchased | Average Price Paid per Share | Maximum Dollar Value Remaining | | :--- | :--- | :--- | :--- | | Jan 2025 | 133 | $1,224.41 | $2,332,846 | | Feb 2025 | 146 | $1,317.36 | $2,140,232 | | Mar 2025 | 152 | $1,341.33 | $1,936,263 | | Total Q1 | 431 | $1,297.15 | - | Other Information No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading plan in Q1 2025 - None of the Company's Directors or Officers adopted, modified, or terminated a Rule 10b5-1 trading agreement during the fiscal quarter ended March 31, 2025[129] Exhibits This section lists exhibits filed with Form 10-Q, including the Credit Agreement and CEO/CFO certifications - Key exhibits filed include the First Amended and Restated Credit Agreement, CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, and iXBRL data files[130]