Hi, good afternoon, everyone. Thanks for joining us. Next up, we have a fireside chat with Monro. Very pleased to have with us Brian D'Ambrosia, Executive Vice President and Chief Financial Officer, and Felix Veksler, Senior Director, Investor Relations. Brian has a presentation that he'd like to walk us through, following which I can start with questions and then open it up to the audience. Over to you, Brian. Thanks, Josh. Good afternoon, everyone. I don't have a presentation, just some opening prepared remarks just to provide some background on Monro before we get into Q&A. Monro is one of the country's leading auto aftermarket services provider. We do services from oil, tire and parts installation, all the way through more complex vehicle repairs. About 1,300 stores, which represents about 9,000 service bays in 32 states. And that significant scale gives us important competitive advantages over our smaller competitors. In fiscal 2024, we did about $1.3 billion in sales and had operating cash flow of about $125 million. We are focused on a strategy that contains three pillars, and the outputs of those pillars are to drive sustainable comparable store sales growth. And that's really done in a service business like Monro's first through proper staffing. That staffing includes scheduling and training, and then also improving 300 small or underperforming stores that we have within our chain. Also, we're focused on maintaining a balanced approach between our tire and service categories. About 50% of our business is tires, 50% service. Those two have different margins, so it's important for our higher margin service categories to grow consistently with our tire category. Additionally, it's important in our space to be competitively priced because of the fragmentation and competitiveness in the industry, and at the same time, deliver an outstanding guest experience to drive repeat business. Our daily activities and the execution of our strategy focus on those as it relates to sustainable store sales growth. We're also focused on margin expansion. To do that, it's primarily through labor optimization. So the same staffing approach that helps to support the top line also helps to make sure that we're optimized for profitability, including focus on productivity through training in our attachment selling initiatives. And then finally, the third part of the strategy really focuses around cash generation. Obviously, improved profitability from the first two will drive that. But at the same time, we are focused on using our strategic partnerships with our vendors to drive inventory optimization, as well as extended payment terms to unlock cash out of working capital. We have four top line initiatives that we recently talked about that are really supportive of these three pillars. And the reason why we're focusing on these initiatives is because it is a challenging consumer environment, particularly in the tire category. And to offset weakness in that category, we're really focused on executing against these initiatives to support the strategy. First is really good tire offers. So, to be sharp on price in this environment is very important. It's a value-oriented consumer who is trading down. And so what we would like to do is preserve our current tire mix. And we're doing that through manufacturer-funded promotions that are allowing us to deliver a lot of value to our guests. The second is oil promotions through our renewed partnership with Valvoline. And that, again, another traffic-driving category that's important for us to continue to see vehicles so that we can perform our services on those vehicles is the oil category. And then the third initiative is really our courtesy inspection, what we call ConfiDrive. We've taken a paper-based process and made it into a digital tablet form, which allows us to improve execution of that, but also allows us to deliver a better guest experience and convert more tire oil visits into other services that may be needed on the vehicle. To help implement that, we have a fourth initiative, which is really our service coupons, which gives our consumers additional discounts to perform services that day to convert those ConfiDrive inspections into additional sales. We've seen these initiatives start to take hold. We drove significant acceleration in our comps as the quarter progressed. We actually saw tires turn the corner and comp unit positive in June, which was the first month we had done that in a couple of quarters. Like I said, a tough macro backdrop right now in the tire category. We saw, like I said, sequential improvement in our service categories while we still have more work to do to continue to maintain the balance between service and tires. We drove margin expansion. That's our second part of the strategy of 220 basis points in the quarter, really taking a huge step forward towards our goal of achieving pre-COVID gross margins. And our solid financial position and cash flow allowed us to continue to maintain a very low leverage profile while at the same time supporting all of our capital allocation priorities, including our dividend. So all in all, I would say we're well positioned, despite this downturn, to really capitalize on fundamentally strong industry trends, multi-year industry trends. And ultimately, our scale, our strategic partnerships, our strong and experienced management team position us to win over that period of time. Thanks for the helpful overview of the business. Yeah. Maybe a good place to start would be just the near-term trends. What are you seeing in terms of consumer demand and inventory across the tire tiers and services segment? You mentioned in the past that the lower-end consumer is particularly pressured. Wondering if you can give us a sense of the demographics of your customer base today and how their buying patterns have shifted over the past few years. Yeah, absolutely. We talked on our last earnings call on May 18th, well, the earnings call before last, about a stretched consumer that was affecting spending patterns, particularly in our higher ticket categories like tires. And then on our last earnings call last week, basically reiterated that we have not seen any changes in the consumer behavior at the low end. So, we don't see any improvement or significant degradation in the macro environment that we were operating in in Q4 versus what we were operating in in April and May when we talked on our May 18th call versus June and July. But what we have seen is improvement in our tire category. And we think that's very specifically related to Monro's manufacturer-funded promotions, really delivering value to the consumer in Tier 1 through 3. Our consumer is a lower to middle-income consumer that typically has an average household income of $100,000 or less. The reason why that's our typical consumer is because of our position in the auto aftermarket ecosystem, where dealerships are tending to see newer vehicles that are on warranty. Our newer vehicles, obviously, call it 0-5 years. The aftermarket tends to see 6+-year-old vehicles. Our sweet spot is 6-12 years. That's because somebody who's driving an aged vehicle typically is a more stretched consumer. They're looking for a little more value and a little more price conscious. That tends to be where the auto aftermarket, that the void that it fills. So we've seen the middle-to-low-income consumer trading down, like I talked about in tires, deferring purchases till absolutely necessary. The good news about our space is it is completely non-discretionary. So, it has to be done eventually. But over short periods of time, the consumer can make decisions out of necessity. Thanks. That's helpful. And then we spoke about the tire deferrals and just the trade-downs as well. Could you maybe help dissect the weakness in the Tier 1 to Tier 3 demand in terms of how much of that you think is driven by deferrals versus trade-downs? And then what would need to happen for this mix to go back to pre-pandemic levels? Yeah. So, we've seen both. We've seen trade-downs and we've seen deferrals. We've probably seen a little bit more recently in the way of trade-downs. So, as we look back to the December, maybe the winter time frame, you saw overall units for the industry were declining, both Tier 1 through 3 and Tier 4. But more recently, units have turned positive really on the backs of Tier 4. And so that's why I say it's gone from a deferral to now the consumer is buying, but the consumer is buying heavily at the Tier 4 level. That is across the industry. For Monro, we have been able to maintain our traditional mix of about 25% Tier 4, 75% Tier 1 through 3. We've been able to do that because while the consumers are looking for value and many of our competitors are offering that value through Tier 4, we've really been effective at positioning our Tier 1 through 3 manufacturer-supported discounts and promotions to help move that consumer into a better value, a branded tire with a manufacturer's mileage warranty, but in doing so, preserving our traditional mix and traditional average selling prices. We've seen both, but we do continue to see the consumer wanting to trade down. Our largest growing category is actually Tier 3, which you would expect as we're moving our consumers from Tier 4 up into the Tier 3 offerings. Got it. We spoke about the manufacturer-funded promotions. And just curious, how much more runway do you see in terms of these promotions? And relatedly, are these promotions Monro-specific given your size and scale, or is it more of an industry dynamic as share losses continue for these manufacturers? Great question. So, the durability of the promotions, I would say, from our standpoint, is that we expect that a level of manufacturer support is going to be needed to continue until improving consumer dynamics, whatever catalyst drives improving consumer dynamics to shift back to more traditional purchasing behaviors in Tier 1 through 3. That being said, I think that Monro's scale and strong relationship with all the manufacturers positions us uniquely to have some of the best promotions in the industry. We've got Tier 1 promotions on our best-known brands. We've got really strong Tier 3 promotions on some foreign brands that we have got great relationships with. And I think that our positioning is unique also in that we're not heavily invested in Tier 4. Tier 4 has always been offered by Monro, and it represents 25% of our tire business, which is a large amount. But we've divested our distribution channels and warehousing so, that we are not stocked up in the warehousing channel with opening price point tires. Opening price point tires tend to be brought in by the container load, by the installer or the distributor, and therefore from overseas. And therefore, you have to make investments in those many months ahead. With Monro not having its own distribution anymore, we're able to very quickly pivot because we only have the inventory in our stores. So we can move in and out of Tier 1 through 3 brands, but also in and out of a focus on Tier 4 or not, given our flexibility and our flexible distribution model where others have a significant amount of stock in their possession that they have to work through before they can make decisions to either exit or change manufacturer focus. Got it. Just double-clicking on that, do you think the industry is close to working its way out of that inventory glut for Tier 4 tires that was developed during the pandemic as shipping returned back to normal trends? Yeah, I think that's exactly right. A lot of the oversupply is related to shipping unlocking post-pandemic. Also, a consumer that slowed down purchases, like I said, around the holiday and the winter selling season this past winter, there was an overall negative units in the industry driven by softer weather, but also a consumer that was deferring at the time. So we exited this tire selling season, which is really the winter months, with extra tires in the supply lines and in the supply chain. It's just going to take time to work through. And so, I think that it will. I think it got probably a little bit worse since we last commented on it in May, probably more tires now than there were then from what we can see. All it will take will be a strong and normal weather in this winter, and the industry should be able to move through those tires. That's helpful, Color. I want to just switch gears to services, which continues to be impacted by some store traffic pressure. Could you give investors a sense of the interlinkages between the services business and the tire segment? And then as tire units start to improve, should you see a commensurate change in service volumes as well? Yeah. So as I talked about in my prepared remarks, one of our operating models is really predicated on bringing a vehicle in, doing the work on that vehicle for what the consumer is asking, but then also performing a courtesy inspection, 32 points on that vehicle so that we can educate that guest on what else that vehicle needs, whether it's at that visit or prioritizing or making them aware of a need at a future visit. So it's very important for us to see the vehicle to be able to offer those additional services or make those additional recommendations. Tires is a big part of our traffic. It's 50% of our business in terms of sales. Because of the high ticket, it doesn't represent that much in terms of traffic, but it does represent a significant amount of our traffic. That and oil change, which is oil is a small portion of our ticket, small ticket, but it does have some traffic behind it. So both of those are important categories and why we're focused on the promotions in tires and the promotions with our oil manufacturer, Valvoline, to drive both of those categories so that we can perform the courtesy inspection and sell the additional services. I think we've got off to a quicker start with our tire category in June and into July than we have with our service initiatives. But we did, like I said, see service improve as the quarter went on. Got it. You mentioned the courtesy inspections, the service coupons. We have tire promotions and then the oil change offers, right? Just wondering if you could give us a sense of which of these initiatives is seeing the most traction from consumers and if there are any initiatives in the pipeline to drive standalone service volume growth in the near term. Absolutely. There are initiatives to drive standalone service volumes. The oil change promotion and the service coupon promotion is one where if you come in and get a set of brakes, we'll give you money off variable amounts depending on the level of service you have done on brakes for other services. That could include a brake flush. It could include battery. It can include any undercar repair that we do, or it can include additional tires. We are using a category like brakes to also sell into categories like tire and even oil. We're focused on bringing the vehicle in for whatever it needs and then making sure the guest doesn't leave without a full understanding of what else their vehicle may need and making it really easy for them to get that done that day if that's what they need. I think some of the proof points really are the fact that if we look at the tire promotions, we increased units as the quarter went on, but also we believe we increased our share as the market went on, as the quarter went on. So, we probably were shareholders in April and May, in June, in our Tier 1 through 3. Based on what we saw, we took share with our mid- to high single-digit Tier 1 through 3 tire unit growth in the month of June. In service, we don't have the similar market share, but I can say that as the quarter went on, we saw momentum pick up in our service categories. In particular, one of the bright spots was batteries, where we came significantly positive in June as a result of the courtesy inspection and also had a little help from some pretty hot weather in some of our markets. Got it. Understood. I surely want to touch upon business outlook and expectations, but just wanted to check with the audience if there's a question in the audience, please. Okay. You did really well. You did well throughout the quarter bringing back some tire demand through those promotions, but you were also able to do well at the gross margin through the manufacturer promotions. You've talked about the oil promotions maybe through your partnerships. Are they structured similarly, or are those going to be more Monro run? No. Basically, it's $10 off an oil change when you sign up with Valvoline's V-Perks, which is basically their loyalty program. So, we will sign them up for that in the store. They will then apply for using our invoice, they'll apply for the rebate from Valvoline directly. Great. On gross margins, you've made some significant improvement in technician productivity over the past few quarters. How should we think about the path back to pre-pandemic gross margins? I think we're still 300 basis points below those levels. As the industry environment normalizes, would it be fair to assume that with these productivity improvements, Monro could have its normalized margin stabilize higher than pre-pandemic? I think that as we have our eyes on those pre-pandemic gross margins, there's two or three things that we have in place that just need to continue. One is we need to continue to see our growth in labor productivity. So, we still have opportunities despite the progress that we've made. We were actually up 240 basis points in labor margins in the quarter. We still have opportunities there. So, that's the first. The second is on material margins. We have not passed and taken full price increases relative to the materials that we have seen. So I think in a more supportive environment, maybe outside of some of the near-term pressure we're seeing on the consumer and their value orientation, there's an opportunity to recapture some of the price increases that we haven't given the consumer environment. But ultimately, the third is the biggest unlock and has the most for us to go is we have fixed costs within gross margin. Our occupancy costs for stores are sitting in gross margin, and we deleveraged 120 basis points on those by running down 10% in comps in the quarter. So even just a flat comp for the quarter would have added 120 basis points to our 37.2% gross margin, putting us up into the 38s. Comp sales positivity will obviously provide more leverage. So, that's certainly the biggest unlock for us to take the next leg up towards our pre-COVID margins. Understood. Then when we think about operating margins, I think you've previously outlined a longer-term target of double-digit operating margins, which is compared to the 4.5% or so in the most recent quarter. Could you maybe lay out a similar potential bridge to these longer-term targets? What is the low-hanging fruit there? And maybe speak to some other drivers of expected margin improvement over time. Absolutely. So, gross margin, we've obviously talked about. On the SG&A side, which is the other piece between gross margin and operating margin, we've held it relatively flat from 2022 to 2023 to 2024, and we called out in our expectations for the year to be relatively flat in G&A again. And that's really been due to our cost reductions. We've seen a similar amount of inflationary pressures in all those costs, but we've been able to offset all of them with streamlining our back office and really leaning into some outsourcing initiatives that we had in place coming out of the pandemic. So, it's been a great job by the team to really keep our cost structure flat in SG&A. Despite that, over that period of time, we've seen about 300 basis points of pressure of SG&A increasing as a percentage of sales. So there's that deleverage on a weaker top line. So, if we were to run again flat in this past quarter, that 300 basis points of deleverage would have been flat. And therefore, that plus the 120 basis points up in gross margin relative to the occupancy costs, just by unwinding that deleverage, we would have been 8%+ operating margin. So, top line is extremely important to us. And despite this difficult tire environment and overall operating environment, we're very focused on doing as much as we can to get our fair share of all the tires and services that are being sold so we can support better top line trends, and we know what that means further down on the P&L. Understood. That's very clear. Maybe just switching, sorry, there's a question in the audience, please. So, it seems an important feature of your business is in the end customer. And to what degree are your end customers sort of, I guess, just running around looking for the best deals on oil changes and tires? Is it just dramatically price-driven versus maybe there's an opportunity for them to be loyal in some respects? And are you trying to make some efforts in there, and do you see any trends taking place about customer loyalty? Absolutely. I talked about in the prepared remarks, we have to be definitely sharp on price to make sure that we gain the interest of a customer that, particularly in tires, is shopping. There's a lot of price transparency online for what competitive offers are. So we want to make sure there are unlike sizes and SKUs that we are sharp on price. But once we have the guest in store, it's important to deliver that experience. And one of the things that is driving our, what is the backbone of our improvement process there is the digital tablet. So, we are using the digital tablet not only to perform the courtesy inspection for our technicians, but our front shop has a tablet to greet the guest at the car or when the guest comes in to make sure that their information is correct using the tablet, to present the needed work to them using the tablet, and to try to create more of a professional interaction between us and the guest. Something that is done at the dealer level, but not as widespread in the auto aftermarket, is that digital experience in store, as well as being marketed to afterwards using the output of that courtesy inspection. We've had a focus on using those processes to really elevate the guest experience. It comes down to execution. So, we believe the strategy is sound to deliver a strong guest experience. It comes down to people and how they're executing it. So, that's where we're really focused on our employee initiatives. We've talked about staffing and all of that as it relates to the back shop, but the front shop, we have just as much of a focus on making sure we've got the right managers in place who are adhering to the Monro standards and then providing them training and coaching opportunities if we don't see the performance we expect relative to those processes. So, if the store's doing the process right, it will lead to a great guest experience. Execution against that process is our focus. I agree with everything you've said, but on the other hand, if the customer is just a customer that wants to just dramatically price shop, that experience is important, but at the same point, it just becomes, in some level, an expense. So, I guess the question I have is still, are you seeing anything that this experience is leading to improve loyalty and therefore you're getting repeat visits and subsequent needs for tires and/or oil or anything like that? Yeah. It's still early days. We just fully launched it. The courtesy inspection was fully launched by the end of March, so we're still only about four months into the full rollout, but we'll have more to talk about related to that. I can say that there is, when it comes to the tire category, there's probably a third of the consumers that are loyal to a brand. There's a third that are loyal to an installer, a retailer like a Monro, and there's a third that are price-sensitive. So for that third that are typically loyal to a Monro, it's important for us to have the selection that they want. So if that's an opening price point consumer, we need to make sure we have opening price point tires. We make sure we have the right offers for them. If it's a price-sensitive consumer, we have to make sure that we have the price points that they want. If it's a brand loyal consumer, we have to make sure we have the brands that they want. So we feel like we're well-positioned to address all three of them. Ultimately, we want to market back to them and get them back in the store and hopefully have them leave us a five-star review. Our Google reviews are about four and a half stars, which is something that we focus on daily. We get reports daily around how we're trending from a reputation management standpoint so we can address coaching opportunities. We'll have more to talk about the progress there, but we agree with you on the importance of that experience for those guests because you might have a price-sensitive consumer, but they still want to do business with you. Right. Just one other question. Is there any opportunities that you're exploring or have been successful at in the B2B side in fleet or other things like that? And if you could just speak a little bit about that as well too. Yeah. We have a growing fleet business. I won't give the exact, but we've said it represents more than 10% of our business. We have partnerships with companies like Enterprise and Hertz. That would be on the rental side. We have partnerships with most of the warranty providers. So if you buy a used car from, let's say, a Carvana, we do business with their warranty provider that they sell the warranty with or they get the warranty with. So, we'll have those cars in our bays, and then we build them directly and get reimbursement at agreed-upon prices. We also have the fleet management companies like the ARIs of the world. We also have relationships there. That's an important part of our business because as consumer business can be a little choppy in this environment, it really has been a focus of ours for our stores to build the relationships with those local Enterprise branches, with those local Hertz locations, because you'd be surprised how much of that business is determined at the local level versus the national level. Any sense of what the margin profiles look like in that business relative to the general consumer business? Yeah. I mean, there's a slight margin degradation there, but I would say overall, even as it grows as a part of our business, we're not seeing it materially affect the consolidated. Do you think there's a fairly significant growth opportunity there, or do you kind of think it's going to grow at market, so? I mean, our penetration within there is for our scale and size, so 32 states is important to those that have national footprints. Easier to do business with one person than with a person or a company in 32 states. So our scale makes us believe we should have a larger share of that business, and we're aggressively focused on making sure that we grow faster than market there. Thanks. You had mentioned that inventory continues to worsen. Why is that? Just kind of walk me through what's happening. Particularly, I guess, is demand worsening, or is it just, I just don't understand why you're having that issue or the industry is having an issue. Yeah. When I said demand's worsening, I would say that is in the channels all the way from what's on the shelf at the installer back to what's on the shelf at the manufacturer. And so the slowdown in tire units hasn't, I believe, been met with as dramatic of a slowdown in production. And there's obviously reasons to keep production up from absorption and all those things and a cost per unit. But ultimately, where this backs up to is going to be the factory floor, and there will have to be some sort of slowdown there if there isn't a demand pickup. Thank you. Yeah. Great. I think we have time for one last question, and I would love to get your thoughts around the longer-term trends and the impact from just EVs and autonomous vehicles as well. Maybe just lay out for us how you think about the longer-term impact to both the tire and services segment and any EV-specific investments that you've been making from an infrastructure perspective? Yeah. Electrification has been something that we've obviously been preparing for and are prepared for. As we think about our business, there's one very clear category that it affects and then one that I think has been maybe a little bit more of a surprise. So the first is oil, obviously. Electric vehicles don't require the fluid exchange. And like I said, that's less than 20%, 15% of our business. But what has been maybe a little bit more of a surprise for those in the industry and certainly those that own electric vehicles is how fast they wear out tires. So we've seen often a normal tire's life could get cut in half if driven normally by an electric vehicle versus what an ICE engine would have. And that is because of the weight of the vehicle as also the torque of the electric motor. So that is definitely a tailwind for us. And we have all of our stores ready to lift electric vehicles. You first have to be able to lift them. They're a little heavier. They also require some special modifications to your lift so you don't damage the undercar in the battery components. All of our 9,000 service space can lift electric vehicles. And you can see anytime you would walk into one of our California stores, you'll likely see a Tesla or other electric vehicle on the lift. So we are currently servicing electric vehicles in the markets that they're predominantly located in. And they're usually in for tires or any type of chassis or front-end work. So we look at EVs as a tailwind on the net net of oil versus tire for Monro, and that's before we even think about potentially replacing that 15% of oil work with other engine work or not engine work, other battery component work. So we don't think we need to necessarily get into battery replacement on EVs, but there are certainly battery servicing that will be required through all the hoses and components that cool the battery compartment, as well as the cooling fluid that may need to be flushed that cools the battery compartment. Got it. I think that's a great place to end. Thanks so much, Brian and Felix, for joining us and sharing the valuable insights. Thanks everyone for joining as well. Thank you.