O'Reilly Automotive, Inc.

Good day and welcome to the O'Reilly Automotive Incorporated first quarter 2026 earnings call. My name is Ali and I will be your operator for today's call. At this time all participants are in a listen only mode. Later we will conduct a question and answer session. During the question and answer session if you have a question please press star 1 on your touchtone phone. I will now turn the call over to Jeremy Fletcher. Mr. Fletcher, you may begin.

Thank you, Ali. Good morning, everyone, and thank you for joining us. During today's conference call, we will discuss our first quarter 2026 results and our updated outlook for 2026. After our prepared comments, we will host a question and answer period. Before we begin this morning, I would like to remind everyone that our comments today contain forward-looking statements. and we intend to be covered by, and we claim the protection under, the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You can identify these statements by forward-looking words such as estimate, may, could, will, believe, expect, would consider, should anticipate, project, plan, intend, or similar words. The company's actual results could differ materially from any forward-looking statements due to several important factors described in the company's latest annual report on Form 10-K for the year ended December 31, 2025, and other recent SEC filings. The company assumes no obligation to update any forward-looking statements made during this call. At this time, I would like to introduce Brad Beckham.

Thanks, Jeremy. Good morning everyone and welcome to the O'Reilly Auto Parts first quarter conference call. Participating on the call with me this morning are Brent Kirby, our president, and Jeremy Fletcher, our chief financial officer. Greg Hensley, our executive chairman, and David O'Reilly, our executive vice chairman, are also present on the call. I'm excited to begin our call by thanking our over 93,000 team members for the incredible results they were able to deliver in the first quarter. Their hard work and and absolute dedication to excellent customer service produced a strong start to 2026 for O'Reilly, with an 8.1% increase in comparable store sales. This was above our expectations for the quarter, and when combined with our new store sales and contributions from our international business, drove double-digit total sales growth of 10.2% for the first quarter of 2026. Our team successfully translated these robust sales results into an impressive 14% increase in operating profit through our focus on profitable growth and expense control. We coupled this strong operating performance with the return of excess capital through our share repurchase program to deliver a 16% increase in diluted earnings per share in the quarter. Thank you again, Team O'Reilly. for keeping our culture strong and providing the best customer service in the business. Now I'd like to take a few minutes to walk through the details of our first quarter comparable store sales performance. Our comp growth of 8.1% solidly surpassed our expectations and we were pleased to see above plan contributions from both sides of our business in the quarter. Our professional business continues to be the larger contributor to our total comp results. With our first quarter results making the third straight quarter, we have posted double digit professional comps. We also saw strength in our DIY side of our business, which generated a mid single digit comp during the first quarter. While DIY was the smaller overall contributor to the total comparable store sales growth in the first quarter, It was an equal driver of the outperformance we delivered versus our expectations coming into the quarter. This outperformance was driven by better than expected growth in ticket counts on both sides of the business. We believe there were some favorable industry tailwinds that aided our results in the first quarter that I will discuss in a moment. However, we are just as confident with our sales momentum also reflects share gains our team is winning on both sides of our business. Next, I want to provide some detail on the cadence of our sales results as we move through the quarter. We note every year that first quarter is often our most volatile quarter as we experience variability in our business resulting from the type and severity of winter weather and the timing of the onset of spring. In addition to this, the timing and magnitude of individual income tax refunds can also be a factor impacting our results through much of February and into March. Beginning with this January, winter weather was favorable and largely as expected, providing a strong start to the quarter. Moving into February, weekly volumes began increasing as tax refunds started to flow to consumers. Our business often receives some level of benefit from tax refund season, but is not always a direct correlation to average refund size or total refund dollars, as weather and general economic conditions can play a role in the extent to which consumers spend these refund dollars and where they are spent. This year, we do believe the combination of an increased in average refund size as well as higher total refund dollars coincided with favorable weather to produce a benefit for our business. Warm and generally dry conditions in most of our markets provided a supportive backdrop for consumers looking to perform vehicle maintenance in conjunction with the benefit from tax refunds. While we surpassed expectations each month, our business strengthened as we moved through the quarter relative to both our plan and on a one, two, and three-year Stat Comp basis. April has had the expected degree of seasonal moderation in volumes relative to March, but our business continues to be strong in both DIY and professional. From a category perspective, our results were driven by broad-based strength across the business, with solid results in many of our undercar hard part categories, coupled with continued healthy performance in our maintenance categories, including oil, filters, and fluids. Even in light of widespread strong comp contributions across a broad range of categories, we still see some evidence of consumer caution. Discretionary categories were not as pressured from a relative comp perspective as we've seen in the past few quarters, but this was mainly due to the soft comparisons as we are lapping periods of pressure in this small subset of our business. I will discuss in more detail in a moment, but our outlook assumes a continuation of this uncertain stance by consumers. Growth in average ticket was a mid single digit contributor to comps on both sides of our business. While average ticket growth represented the larger driver of our comp for the first quarter, these results were essentially in line with our expectations. As I referenced earlier, it was really the growth in transactions that exceeded our expectations. Coming into the quarter, we assumed average ticket would benefit from same skew inflation of approximately 6% and actual results came in right in line with those expectations. As a reminder, the front half of 2026 is expected to receive a larger benefit from same skew inflation as we do not compare against the more significant cost and associated price increases in 2025 until the third quarter. Turning to guidance. we maintained our full year comparable store sales guidance range of 3 to 5%. We are very pleased with the strong start to 2026 that our team has been able to deliver. The first quarter results exceeded our plan and right now have pushed us to the top half of our full year range. However, we remain cautious in our outlook for the consumer. Rapid increases in fuel costs have the potential to impact consumer spending, even in predominantly non-discretionary sectors like our industry. While the more fundamental long-term demand drivers of miles driven and the average age and size of the vehicle fleet are expected to remain supportive and change very gradually over time, spikes in prices at the pump and the impact it can have on other day-to-day spending in the life of a consumer can cause short-term reactions. So far, our first quarter results and trends thus far in April have not indicated a pullback in consumer demand. However, we remain cognizant that sustained inflation pressure on the consumer or potential for future shocks could create volatility in demand. Likewise, we are always cautious to not overreact to first quarter results, which can be susceptible to demand variability driven by weather and tax refund dynamics. Given these considerations, we have kept ourselves an operating margin outlook for the remaining three quarters of the year unchanged from our previous guidance. It goes without saying that our team is highly motivated to sustain our first quarter momentum as we move through 2026. Ultimately, we will lean on our business model of service and availability to grow our business with both our existing and new customers the same. We have confidence in the health of our industry and even more in our ability to take market share in any market backdrop. Our store and sales teams operate with a high degree of discipline within their markets. We expect to win business by delivering value through deep win-win relationships, excellent customer service, superior product availability, as our teams focus on partnering with our professional customers who recognize this value and place us in a position of preferred supplier as a result of the consistent execution of our team. This same high standard of customer service also drives our DIY business. since these customers are just as dependent on the trusted advice of our professional parts people to help them solve problems, go the extra mile, and in turn keep their vehicles on the road and well maintained. Before I wrap up, I would like to note that we are increasing our full-year diluted earnings per share guidance to a range of $3.15 to $3.25. Our increase in EPS guidance is driven by our first quarter sales and operating performance and the impact of shares repurchase through the date of our earnings release yesterday. We are pleased to be delivering an increase to our full year guide after kicking off the year and look forward to the opportunity to execute on our fundamentals and generate strong results throughout the remainder of the year. As I wrap up my prepared comments, I'd like to take the opportunity once again to thank Team O'Reilly for your hard work and commitment to growing our business. Now, I'll turn the call over to Brent.