Advance Auto Elements Experiences Fourth Quarter and Full 12 months 2022 Outcomes

Fourth Quarter
Web Gross sales Elevated 3.2% to $2.5 Billion; Comparable Retailer Gross sales Elevated 2.1%
Working Earnings Margin Elevated 64 Foundation Factors; Adjusted Working Earnings Margin Elevated 146 Foundation Factors

Full 12 months
Web Gross sales Elevated 1.4% to $11.2 Billion; Comparable Retailer Gross sales Elevated 0.3%
Working Earnings Margin Decreased 122 Foundation Factors; Adjusted Working Earnings Margin Elevated 24 Foundation Factors
Diluted EPS Decreased 13.4%; Adjusted Diluted EPS Elevated 8.5%
Returned $934 Million in Money to Shareholders

RALEIGH, N.C., February 28, 2023–(BUSINESS WIRE)–Advance Auto Elements, Inc. (NYSE: AAP), a number one automotive aftermarket elements supplier in North America, that serves each skilled installer and do-it-yourself prospects, introduced its monetary outcomes for the fourth quarter and full 12 months ended December 31, 2022.

“In 2022, our group members as soon as once more labored to serve our prospects with relentless focus and dedication. Regardless of challenges all through 2022, we made progress on our strategic initiatives, together with the growth of our footprint, additional strengthening of our DieHard^® model and improved buyer loyalty,” mentioned Tom Greco, president and chief govt officer. “Nevertheless, we aren’t happy with our leads to 2022 and are taking decisive actions to enhance efficiency in 2023. Importantly, the disciplined stock and pricing actions we mentioned final quarter to adapt to an evolving aggressive panorama contributed to stronger leads to This autumn and we ended the 12 months with optimistic momentum.

“We count on to see additional enhancements in stock availability all through 2023, which we view as the one most vital driver to speed up topline development. After a number of years of great investments in complicated transformation initiatives and nearly all of the mixing behind us, we’re now in a position to focus extra time and assets on leveraging our differentiated asset base and bettering execution to drive long-term shareholder worth.”

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Fourth Quarter and Full 12 months 2022 Outcomes ^{(1, 2)}

Fourth quarter 2022 Web gross sales totaled $2.5 billion, a 3.2% enhance in contrast with the prior 12 months, primarily pushed by strategic pricing and new retailer openings. Comparable retailer gross sales for the fourth quarter 2022 elevated 2.1%. For full 12 months 2022, Web gross sales of $11.2 billion elevated 1.4% from 2021. Comparable retailer gross sales for the complete 12 months elevated 0.3%.

The corporate’s GAAP Gross revenue elevated 1.7% from the fourth quarter of the prior 12 months to $1.1 billion or 44.1% of Web gross sales in contrast with 44.7% the prior 12 months quarter. Adjusted gross revenue elevated 3.4% from the fourth quarter of the prior 12 months to $1.2 billion. Adjusted gross revenue margin as 46.9% of Web gross sales was comparatively flat in contrast with the fourth quarter of the prior 12 months, primarily pushed by enhancements in strategic pricing, channel combine favorability and owned model growth. This was partially offset by product value inflation. The corporate’s full 12 months GAAP Gross revenue was $5.0 billion, or 44.5% of Web gross sales which decreased 33 foundation factors in contrast with the prior 12 months. Adjusted gross revenue was $5.3 billion, or 47.3% of Web gross sales which elevated 135 foundation factors from the prior 12 months.

The corporate’s GAAP SG&A was $958.0 million which was 38.7% of Web gross sales in contrast with 40.0% for the prior 12 months quarter. Adjusted SG&A decreased 0.4% from the fourth quarter of the prior 12 months to $942.5 million. As a share of Web gross sales, Adjusted SG&A was 38.1% within the fourth quarter, an enchancment of 136 foundation factors from the fourth quarter of the prior 12 months. This was primarily pushed by a 12 months over 12 months lower in incentive compensation and advertising bills. These have been partially offset by inflation in retailer labor in addition to greater medical prices. The corporate’s full 12 months GAAP SG&A was $4.2 billion, or 38.1% of Web gross sales in contrast with 37.2% within the prior 12 months. For full 12 months 2022, Adjusted SG&A was $4.2 billion, or 37.5% of Web gross sales in contrast with 36.4% within the prior 12 months.

The corporate’s fourth quarter GAAP Working earnings was $132.0 million, a rise of 17.4% in contrast with the fourth quarter of the prior 12 months and elevated 64 foundation factors to five.3% of Web gross sales in contrast with 4.7% within the prior 12 months. Adjusted working earnings was $218.5 million, a rise of 23.6% in contrast with the fourth quarter of the prior 12 months. Adjusted working earnings margin elevated to eight.8%, an enchancment of 146 foundation factors in contrast with the fourth quarter of the prior 12 months. The corporate’s full 12 months GAAP Working earnings was $714.2 million, which was 6.4% of Web gross sales in contrast with 7.6% within the prior 12 months. Adjusted working earnings was $1.1 billion, which was 9.8% of Web gross sales in contrast with 9.6% within the prior 12 months.

The corporate’s efficient tax fee within the fourth quarter of 2022 was 16.2%. On a GAAP foundation, the corporate’s Diluted EPS elevated 37.7% to $1.79 in contrast with $1.30 within the fourth quarter of 2021. The corporate’s Adjusted diluted EPS elevated 39.1% to $2.88 in contrast with $2.07 within the fourth quarter of the prior 12 months. Within the fourth quarter, diluted EPS enchancment on each a GAAP and adjusted foundation was pushed by sturdy working efficiency and the adjustment of roughly $0.16 on account of a change within the purposeful foreign money designation of a overseas subsidiary. The efficient tax fee for full 12 months 2022 was 22.6%. On a GAAP foundation, the corporate’s 2022 Diluted EPS declined 13.4% to $8.27 in contrast with $9.55 within the prior 12 months. Adjusted diluted EPS elevated 8.5% to $13.04 in contrast with $12.02 within the prior 12 months.

Web money supplied by working actions was $0.7 billion for the complete 12 months 2022 versus $1.1 billion for the prior 12 months. The lower was primarily pushed by decrease Web earnings and dealing capital. Free money stream for the complete 12 months 2022 was $298.2 million, in contrast with $822.6 million for the prior 12 months.

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Capital Allocation

Throughout 2022, the corporate repurchased a complete of three.0 million shares of its widespread inventory for an combination quantity of $598.2 million, or a median value of $201.88 per share. On the finish of the fourth quarter of 2022, the corporate had $947.3 million remaining underneath the share repurchase program.

On February 21, 2023, the corporate declared an everyday money dividend of $1.50 per share to be paid on April 28, 2023 to all widespread stockholders of file as of April 14, 2023.

Full 12 months 2023 Steerage

“In 2023 we’re shifting to GAAP as our reporting technique for annual steerage. Because the GPI integration nears completion, we count on transformation prices to be much less impactful, which reduces the necessity for non-GAAP changes. As well as, we imagine that specializing in GAAP outcomes will enhance the understanding and comparability with our closest friends,” mentioned Jeff Shepherd, govt vice chairman and chief monetary officer. “In 2023 we’re elevating our efficiency to enhance topline development and share beneficial properties whereas delivering working earnings margin growth.”

Investor Convention Name

The corporate will element its outcomes for the fourth quarter and full 12 months 2022 through a webcast scheduled to start at 8 a.m. Japanese Time on Tuesday, February 28, 2023. The webcast might be accessible through the Investor Relations web page of the corporate’s web site (ir.AdvanceAutoParts.com).

To affix by telephone, please pre-register on-line for dial-in and passcode data. Upon registering, contributors will obtain a affirmation with name particulars and a registrant ID. Whereas registration is open by way of the stay name, the corporate suggests registering a day prematurely or at minimal 10 minutes earlier than the beginning of the decision. A replay of the convention name might be accessible on the corporate’s Investor Relations web site for one 12 months.

About Advance Auto Elements

Advance Auto Elements, Inc. is a number one automotive aftermarket elements supplier that serves each skilled installer and do-it-yourself prospects. As of December 31, 2022, Advance operated 4,770 shops and 316 Worldpac branches primarily inside america, with extra places in Canada, Puerto Rico and the U.S. Virgin Islands. The corporate additionally served 1,311 independently owned Carquest branded shops throughout these places along with Mexico and varied Caribbean islands. Extra details about Advance, together with employment alternatives, buyer companies, and on-line searching for elements, equipment and different choices may be discovered at www.AdvanceAutoParts.com.

Ahead-Wanting Statements

Sure statements herein are “forward-looking statements” inside the that means of the Non-public Securities Litigation Reform Act of 1995. Ahead-looking statements are normally identifiable by phrases equivalent to “anticipate,” “imagine,” “may,” “estimate,” “count on,” “forecast,” “steerage,” “intend,” “possible,” “could,” “plan,” “place,” “doable,” “potential,” “possible,” “undertaking,” “ought to,” “technique,” “will,” or related language. All statements apart from statements of historic truth are forward-looking statements, together with, however not restricted to, statements concerning the firm’s strategic initiatives, operational plans and targets, expectations for financial situations and restoration and future enterprise and monetary efficiency, in addition to statements relating to underlying assumptions associated thereto. Ahead-looking statements replicate the corporate’s views based mostly on historic outcomes, present data and assumptions associated to future developments. Besides as could also be required by legislation, the corporate undertakes no obligation to replace any forward-looking statements made herein. Ahead-looking statements are topic to numerous dangers and uncertainties that would trigger precise outcomes to vary materially from these projected or implied by the forward-looking statements. They embrace, amongst others, components associated to the corporate’s management transition, the timing and implementation of strategic initiatives, together with with respect to labor shortages or disruptions and the impression on our potential to finish retailer openings, the extremely aggressive nature of the corporate’s trade, demand for the corporate’s services, complexities in its stock and provide chain, and challenges with reworking and rising our enterprise. Please check with “Merchandise 1A. Danger Elements.” of the corporate’s most up-to-date Annual Report on Kind 10-Ok, as up to date by its Quarterly Report on Kind 10-Q and different filings made by the corporate with the Securities and Alternate Fee, for an outline of those and different dangers and uncertainties that would trigger precise outcomes to vary materially from these projected or implied by the forward-looking statements.

Reconciliation of Non-GAAP Monetary Measures

The corporate’s monetary outcomes embrace sure monetary measures not derived in accordance with accounting ideas typically accepted in america of America (“GAAP”). Non-GAAP monetary measures shouldn’t be used as an alternative to GAAP monetary measures, or thought-about in isolation, for the aim of analyzing the corporate’s working efficiency, monetary place or money flows. The corporate has introduced these non-GAAP monetary measures because it believes that the presentation of its monetary outcomes that exclude (1) LIFO impacts; (2) transformation bills underneath the corporate’s strategic marketing strategy; (3) non-cash amortization associated to the acquired Basic Elements Worldwide, Inc. (“GPI”) intangible belongings; and (4) different non-recurring changes is helpful and indicative of the corporate’s base operations as a result of the bills differ from interval to interval when it comes to dimension, nature and significance and/or relate to retailer closure and consolidation exercise in extra of historic ranges. These measures help in evaluating the corporate’s present working outcomes with previous durations and with the operational efficiency of different firms in its trade. The disclosure of those measures permits traders to judge the corporate’s efficiency utilizing the identical measures administration makes use of in growing inner budgets and forecasts and in evaluating administration’s compensation. Included under is an outline of the bills that the corporate has decided aren’t regular, recurring money working bills essential to function its enterprise and the rationale for why offering these measures is helpful to traders as a complement to the GAAP measures.

LIFO Impacts — Starting within the first quarter of 2021, to help in evaluating the corporate’s present working outcomes with the operational efficiency of different firms within the trade, the impression of LIFO on the corporate’s outcomes of operations is a reconciling merchandise to reach at non-GAAP monetary measures.

Transformation Bills — Prices incurred in reference to the corporate’s marketing strategy that focuses on particular transformative actions that relate to the mixing and streamlining of its working construction throughout the enterprise, that the corporate doesn’t view to be regular money working bills. These bills embrace, however aren’t restricted to the next:

• Restructuring prices – Prices primarily regarding the early termination of lease obligations, asset impairment prices, different facility closure prices and group member severance in reference to our voluntary retirement program and continued optimization of our group.

• Third-party skilled companies – Prices primarily regarding companies rendered by distributors for helping the corporate with the event of assorted data expertise and provide chain initiatives in reference to the corporate’s enterprise integration initiatives.

• Different vital prices – Prices primarily regarding accelerated depreciation of assorted legacy data expertise and provide chain methods in reference to the corporate’s enterprise integration initiatives and momentary off-site workspace for undertaking groups who’re primarily engaged on the event of particular transformative actions that relate to the mixing and streamlining of the corporate’s working construction throughout the enterprise.

GPI Amortization of Acquired Intangible Belongings — As a part of the corporate’s acquisition of GPI, the corporate obtained varied intangible belongings, together with buyer relationships, non-compete contracts and favorable lease agreements, which they count on to be topic to amortization by way of 2025.

NOTE: Adjusted gross revenue, Adjusted gross revenue margin (calculated by dividing Adjusted gross revenue by Web gross sales), Adjusted SG&A, Adjusted SG&A as a share of Web gross sales, Adjusted working earnings and Adjusted working earnings margin (calculated by dividing Adjusted working earnings by Web gross sales) are non-GAAP measures. Administration believes these non-GAAP measures are vital metrics in assessing the general efficiency of the enterprise and makes use of these metrics in its ongoing reporting. On that foundation, administration believes it’s helpful to supply these metrics to traders and potential traders to judge the corporate’s working efficiency throughout durations adjusting for this stuff (check with the reconciliations of non-GAAP changes above). These non-GAAP measures may not be calculated in the identical method as, and thus may not be akin to, equally titled measures reported by different firms. Non-GAAP measures shouldn’t be utilized by traders or third events as the only foundation for formulating funding selections, as they might exclude numerous vital money and non-cash recurring objects.

NOTE: Administration makes use of Free money stream as a measure of its liquidity and believes it’s a helpful indicator to traders or potential traders of the corporate’s potential to implement development methods and repair debt. Free money stream is a non-GAAP measure and must be thought-about along with, however not as an alternative to, data contained within the firm’s condensed consolidated assertion of money flows as a measure of liquidity.

NOTE: Administration believes its Adjusted Debt to Adjusted EBITDAR ratio (“leverage ratio”) is a key monetary metric for debt securities, as reviewed by ranking companies, and believes its debt ranges are finest analyzed utilizing this measure. The corporate’s aim is to keep up an funding grade ranking. The corporate’s credit standing straight impacts the rates of interest on borrowings underneath its present credit score facility and will impression the corporate’s potential to acquire extra funding. If the corporate was unable to keep up its funding grade ranking this might negatively impression future efficiency and restrict development alternatives. Related measures are utilized within the calculation of the monetary covenants and ratios contained within the firm’s financing preparations. The leverage ratio calculated by the corporate is a non-GAAP measure and shouldn’t be thought-about an alternative to debt to web earnings, web earnings or debt as decided in accordance with GAAP. The corporate adjusts the calculation to take away lease expense and so as to add again the corporate’s present working lease liabilities associated to their right-of-use belongings to supply a extra significant comparability with the corporate’s friends and to account for variations in debt constructions and leasing preparations. The corporate’s calculation of its leverage ratio may not be calculated in the identical method as, and thus may not be akin to, equally titled measures by different firms.

Retailer Data:

Throughout the fifty-two weeks ended December 31, 2022, 144 shops and branches have been opened and 30 have been closed or consolidated, leading to a complete of 5,086 shops and branches as of December 31, 2022, in contrast with a complete of 4,972 shops and branches as of January 1, 2022.

The under desk summarizes the modifications within the variety of company-operated shops and branches throughout the twelve and fifty-two weeks ended December 31, 2022:

View supply model on businesswire.com: https://www.businesswire.com/information/residence/20230227005941/en/

Contacts

Investor Relations Contact:
Elisabeth Eisleben
T: (919) 227-5466
E: [email protected]

Media Contact:
Darryl Carr
T: (984) 389-7207
E: [email protected]