Presenting next, we have Monro. Headquartered in Rochester, New York, is one of the largest operators of repair chains in the US, with 1,300 underlying repair shops. Monro has 30 million shares, about $27,850 million market cap, net debt of $240 million, for an enterprise value of $1.2 billion. Speaking with us today are CEO Michael Broderick and CFO Brian D'Ambrosia. Gentlemen, thank you for being here. Our pleasure. Thank you. Good morning, everyone. Perfect. So once again, thanks for being here. If you could just give us a brief review of Monro, the general business operations of the around 1,300 stores that you operate. Sure. We are, I think, the only public full-service provider in the industry. Half of our business is tires. Half of our business is other services. And we perform in most of our locations all services based on the need of the vehicle. We operate in 32 states. I would say that we got California in pretty good shape. We're east of the Mississippi River, and we have a lot of green space that we're still looking to develop. We've taken hiatus over the last two years, but we still think that's a big opportunity for us in the near future as we stabilize our business. A lot of what we focus on right now is coming out of over the past year. We were literally in this room, in rooms like this, telling it's a very difficult consumer environment for the most part. Basically, we talked about the tire business as a deferred category, and we've been really rebuilding Monro month- over- month, quarter- over- quarter, really stabilizing our comps because that's how we really start driving earnings per share. The profitability of the organization is getting our volume back, led with tires, leading with oil change. Then something that's very important is properly inspecting the vehicle. The last thing I want to do is ever have a car come off one of my lifts that we haven't properly inspected to determine whether or not there's a problem with that vehicle so that we give the customer, I would say, a health check on that vehicle. Perfect. And I was just asked to remind everyone that, of course, everyone can ask questions. But just to stay on that topic, also, if you could describe the customer, what they want and how you provide that. Sure. I've been in this business for 35 years, so I'm fairly familiar with the consumer. Started from the bottom up, so I kind of always stayed in touch with what the consumer wants. In the past, I would say the consumer was very focused on quality repair done right the first time at a reasonable price. Right now, I would say the consumer is very focused on still quality repair. I would say it's a little bit more difficult now to clearly communicate the needs of that vehicle, and they are starting to lean in more promotion. They want a deal right now. So that's kind of, I would say, it's still really important that we do quality work. That's not going to change, but we are always looking to drive more value or perceived value with our customers. Yep. And we've historically talked about your investment in this digital technology and making sure the customer kind of trusts a lot of what the technician is saying. Can you talk about that investment? Sure. I think it's really important. I think you go to shops driven by the OEMs. I would say the biggest issue in the aftermarket, nobody trusts us. They always think there's something that they're buying that they don't need. The OEs actually put a digital courtesy inspection tool like a tablet. Basically, it takes pictures. It's able to communicate to the consumer in a very transparent way what's wrong with their vehicle. It shows them a picture of their vehicle and what's wrong with their vehicle so the consumer can make the ultimate decision of buying or deferring. The aftermarket's starting to adopt that. Monro has been leading that. We put it in across our organization full-blown in April. So we've been on a change management mission for the last six to seven months. And it is definitely one of the biggest change management processes that I've put in place in my career. Ultimately, what it does is it provides us just a better way to communicate with our consumers. In the past, we used to use a piece of paper. Sometimes it was properly filled out. Sometimes it wasn't. Now we have complete oversight over the process. And I believe, and I do believe the aftermarket, in order to drive consumer trust, is that we need to be able to provide them this data in a way that they can receive it. They want to receive it so they can ultimately make that decision. Great. And then since we touched on the OE and the dealership, just talk about them as a competitor. Why does someone pick, and you did talk about this a little bit, but why do they pick Monro over the dealership? Yeah. The dealerships do a good job maintaining that first consumer when they buy the car, keeping them attached to that dealership. So the consumer buys the car, and then there's free oil change, car wash, whatever they're doing in order to incentivize the customer to come back to the dealership. Our strength, Monro strength and the aftermarket strength, is really with that second and third generation car owner or that vehicle that's transferred down. We're a better value, in my opinion, without question. We provide technology similar to the OE. We're providing them the information to make the right decisions. We're potentially more convenient. We're able to take appointments easier. We have more locations. I would say that second and third generation car owner, we want to own. And a lot of those decisions are made on convenience, quality of work, and price. That just doesn't go for service work. It also goes. We're very focused on our tire category and our oil change category because those are our core drivers in our business. Just to stick with the customer, could you just help us kind of understand the store dynamics? What's your average ticket at an underlying store and any opportunity, I guess, for operating leverage going forward? Yeah. I'll start with the average ticket. Maybe Brian can cover the leverage. It's about $250, so when you look at an average ticket that high, we have to do a hell of a job making sure that we can reach into that customer's pocket. That's a big ticket for our customers right now. Just to remind you, our customers, dual income under $100,000. So when you're asking for $250, we better do a hell of a job. Otherwise, they don't come back. I'm sorry to step in here, but just you have a few different brands. Is that average ticket vary across maybe tires versus services or just any? Yeah. Our tire category, you can kind just leave it as it averages out about $250. Tires could cost as much as $150 a piece. It could be even less than $100, but you're still talking about a big ticket item. But you can pretty much see that from a customer perspective. Brakes are a high ticket item. And then we have oil change less than $100. So these are kind of some of the variations of our customer. But ultimately, when we look at all those customers, I do believe the customers come into our stores 1.6 times. They start with the oil change, and then they have other services that are expensive compared to a customer that makes about $50,000 a piece. It's expensive. So that value that we bring, it has to be relevant to our customers. Related to operating leverage, it actually is our largest opportunity. If we look at our fixed cost structure of our 1,300 locations, we have a tremendous opportunity to drive margin improvement through both increased traffic, but also through the building of ticket through the inspection process. Tremendous amount of leverage opportunity against the fixed costs we have that can be delivered by top line. Perfect. And Michael, you started back in 2021 during a period of supply chain challenges, hyperinflation. Now, of course, we have some pressure on the consumer. Yeah. Great, but what have you learned over these past few years and really the strategy? I know you touched on some of them to drive growth going forward. Yeah. So So I've been calling on Monro for over 20 years, so I know exactly what Monro and our competitors—what they deal with. I've learned many things over my at least five, six, seven things that I would probably call out. Number one, you got to do great work. If you don't have a good customer experience, you're not going to be able to drive, I would say, sales. And I would say sales over sales. And that was a big opportunity for Monro. It still is. And how do we carve back sales? Number two is maintaining our tire focus and our oil change focus. Number three would be the digital courtesy inspection tool. Most customers don't appreciate it until you give them a health report that's green, and they feel confident that their vehicle is in good driving ability. But also, if we find something that's wrong, even though they turn us down, we still notify them. So if something does happen, it gives us credibility. It starts enabling us to have more trust in that buying decision. When you look at underperforming stores, I would say one of my big learnings is you've got to fix your underperforming stores. You can't let 300 stores literally wag the dog. It has to be fixed. It's all about people. It's all about process. And that's what we've been focusing on. And then I'd probably say in closing, it's very much of a people business, and you've got to work the stores. And that's what I've been doing for the last four years. Perfect. And then as I mentioned, you've just seen significant inflation. The customer has seen it. Can you kind of talk around some of your decisions around maybe pricing, pushing that pricing through, and then where you are now? Yeah. Overall, we've said this that we've been seeing at the peak, we saw kind of high single-digit inflation. We were only passing on low single digits to the consumer. And that really does speak to the competitive dynamics that the industry at large was facing. You can see that really kind of manifests itself in the tire business where maybe more price was passed on, minimum average price was moved up. And what that resulted with is what the industry is contending with now is the significant trade down into Tier 4 is the consumers not accepting the price and moving down in the value tier. So I think those are the dynamics that we constantly navigated through in our pricing decisions. Ultimately, though, I think a couple of quarters ago, Mike made the comment on one of our calls that we're going to get our tires back. I think that's what we've been able to demonstrate in that during a period of time where we were holding our skew, trying to remain very relevant on Tier 1 through three and protecting the Tier 4 to not become too big a part of our skew. We were doing that with, at the time, not a lot of support. But what we've seen over the, as the industry has experienced the challenges it has that we've really got the support of our manufacturers now. And that's what's allowing us to go get our tires back, but get those tires back with healthy ASP because we have a good mix of tier one through four. Those were some of the bigger decisions in tire category that we had to navigate through during that period of time. Great. And Brian, I guess stick with that help from the manufacturers which showed up in your numbers. We've discussed the ability to maybe achieve some of your pre-COVID gross margin levels at some point. Can you just talk about the path forward to get there? Yeah, absolutely. So when we talk about pre-COVID levels for us, that means just to put a number on it, 38%, 39%. And I think one of the reasons why you would say maybe that why not into the 40s where we had touched at certain points in time and also when we had a wholesale business that by divesting our wholesale business, margins should have been more supported. I think that's what you're seeing in maybe the permanent step down from 41 to our 38 target is just the wage inflation we've taken and really the significant amount of technician wage inflation that has probably reset that to be a high 30s kind of pre-COVID number as we think about it. But the path from here, the kind of mid-30s back up into that number really is based first on the operating leverage that we were talking about earlier. We've got fixed costs that reside in cost of goods sold. Obviously, we've got G&A as well that makes its way down to our operating margin. But that high growth, sales growth will allow us to leverage those costs. The second thing is going to be our service tire mix, making sure we have a balance approach. When we see service comps growing at the same rate as tire comps, that's going to be margin beneficial to us and help us to move our margins back up to pre-COVID levels. And then the final thing that we know we're going to be contending with and we feel like we'll be contending with, but as it abates, would be the trade down within tires and the tire mix dynamic. We think that remains a little bit more of a stickier headwind, but ultimately, any relief there would certainly help us on our path back to pre-COVID margins. Yep. And then I think that wage inflation has led to this conversation about your strategy around labor technicians. Can you discuss the strategy there and the benefit to the margin as well? Yeah. I think that the technician strategy has been, first of all, be staffed for growth, right? So we feel at this point in time that we are staffed to be able to grow the business. It really comes down to managing schedules, and we've been delivering improved overtime performance and higher productivity as measured by sales per tech hour, so we've been managing our demand with our schedules and making sure that we're scheduled for success. I do think that we have plenty of opportunity to open up those schedules as well as to bring on additional technicians as we support what we hope to be growth moving forward, so I think that not only getting leverage on our fixed costs, but there's probably leverage to be had within our labor costs as well with a growing top line. Great. And then acquisitions actually used to be a part of the strategy, but clearly a focus on making this the best business out there. Can you talk about acquisitions or even divestitures and potentially, I think when we look at the overall portfolio, any consolidation of some of the underlying brands? Yeah. I can take the acquisitions and then maybe Mike can comment on the brands. As far as the acquisitions go, they've been a staple of Monro's growth to 1,300 locations in 32 states. We expect it to be a staple of our future growth. Right now, what we've been building, we believe, is a platform for that future growth, putting in the technologies like Mike talked about with digital courtesy inspection, putting in place our processes to be able to then grow to the next round of stores either in our existing markets or into white space. We've got the balance sheet for it. Certainly, there's fragmentation in the industry that presents a lot of opportunities. But during this period of time where we haven't grown through unit growth, we really have not missed out, we feel, on anything that has gotten done in the market. Yeah. Just a quick 101 to follow up on Carolina's question. Goldman Sachs is marketing a company called Les Schwab, and the price tag is speculated to be in the billions and billions of dollars. Can you compare your stores to what they're doing? And then we can all pray for snow and ice. That's right. I think I'm aware of what you're mentioning, and I do believe that there's a little bit of a model difference there, and I think that if you look at that model, it includes a large kind of ag-type business as well, so these stores are doing, call it kind of Farm&F leet family is kind of the model, right? So there's significantly larger sales per store. There's also some differences in comp structures as it relates to store managers, so for us, it's a little bit different of a model. The geography is a little bit different than ours, so we certainly believe that what we're doing across the country is a little bit different than that business as it presents itself. But when you talk about family, it's the same business. And we like our perspective. We grow tires. We grow brakes. We grow oil change. That's what we focus on, that relationship with the customer. So I support totally what Brian said, but we're competitors in those eight states where we overlap. Yeah. Just before Brian, the other Brian gets on, Goodyear reported yesterday indicating that the downshift in tire mix to imports at the lower end of the market. Maybe you touched on this. Can you flesh that out a little better? Yeah. I'll take that one. Goodyear is very important to us. We want them to be successful. I just want to make sure when I look at their down at 11.3%, we were flat in the quarter. So we're a winner to them. As long as we're a winner, we're going to negotiate like hell, making sure they support us in tier one through three. I do not believe the industry should just shift down to tier four. Cheap tires is not the way to go, but I do understand the consumer. We'll meet the consumer where they need to be. That's going back to the value proposition. Selling tires at $40 is maybe necessary. I don't believe when you look at a second-generation car owner that they should be slapping on $40 tires and expect to get the ride of that first-generation car owner. Oh, and let me make sure everybody's clear on my business model. You sell them bad tires, they don't come back to you for anything else for three years as they're trying to make that decision. So I'm very conscious of keeping my relationship with my customers solid, and that's making sure that we recommend the proper tire form so that we can perform other services. But going back to Goodyear, they need to help us, and they will continue to help us, making sure that we keep Tier 1 through 3 healthy. We're taking market share in Tier 1 through 3, and at the same time, we are providing a Tier 4 offering. It's just we're not leading that. And they talked a lot about US TMA. We've stayed away from that. We've stayed away from anything that's not focused on the self-help story at Monro and the fact that we're going to provide our customers choice, and then they can ultimately make the decisions, and we have all the choices. And we're going to get our tire business back that we showed starting in May, June, and we're going to get our services business back. And that's what we're focused on. Yes. Lee, go ahead. I have a question. Do your stores carry the run-flat tires, which may also be called the all-season tires? And are they significantly more profitable for your tire stores to sell based on how long the tires last and the cost of the tires? And are they worth it? I'm afraid that a lot of the car manufacturers will turn exclusively to those types of tires to save space in the trunk of the cars. Yeah. Very familiar with run flat. We do carry them. We don't have any distribution centers anymore, and we probably don't talk enough about that. We're incredibly nimble, incredibly nimble. I can negotiate a deal with a vendor in two weeks and get those tires in my shop. I don't have to flood containers anymore with tier four tires, so if you're looking for run-flat, I'll get run-flat for you. I have relationships with many distributors. It takes me a couple of hours to get your assortment. When you look at the OEM decisions, I have no problems with that either. I will tell you, my biggest opportunity and the industry's biggest opportunity is to properly educate the consumer on their choices. That's our challenge. A lot of what I was trying to say about Confidence is all about education to the consumer. We've seen dealers who, I guess, aren't necessarily your number one competition, but clearly a portion of competition use technology, apps, etc., to really try and drive that engagement with their own customer base beyond the typical dealer service level. How do you compete necessarily with that customer who otherwise would have gone to a dealer that would be a Tier 1 tire sort of customer through that technology? So without sounding again about the digital courtesy inspection tool and the fact that it can communicate and the fact that the OEM is using the same technology, we're actually using as good, if not more, better, in my opinion, better technology to properly communicate to the consumer. I mean, we can take pictures. We can take pictures of their vehicle. We'll have videos. We'll have a lot of things that we'll be able to communicate to the consumer. And the consumers are rewarding us with, I would say, some of the categories are really starting to pop. And then the big unlock is how do we communicate once they come into our stores, just like the dealers are doing through the CRM, through Google? How do we communicate? And we literally keep reminding the customer, if they were in our shop, we did an inspection. We found X, Y, and Z, and then we go back to them and communicate just what the dealers are doing. For those that have a dealer relationship, that's what we're doing, the CRM process, making sure that we stay relevant in that customer's decision process. But it all starts with that technology of properly inspecting that vehicle. That's a better way to communicate. And you either have it or you don't. It doesn't mean it's easy to deploy because our technicians, it's taking back the leverage and the process at the store level. And I don't want to underestimate that change management. Stay on your technicians and how, one, you're retaining them because I'd imagine the store productivity goes down considerably when you lose a master technician. How do you retain? How do you recruit? How do you incent them to stay within the Monro family? Yeah. We are a flat-rate organization, so they eat what they hunt. So the best way to describe it, and we have two different technicians, and I have to be really clear on this. The general service technicians are hourly employee with a small incentive. The flat-rate technicians are all incentive. So we have to keep them busy. When they're busy, they make more money, and they stay with us. The general service technician has been a big focus of us. In the past, these are hourly employees. They are trying to figure out whether or not the aftermarket service business is part of their future. In the past, it's taken us months in order to determine whether or not that inclination is at the Monro way. I would argue to say a lot of our productivity is very focused on making sure that we address them in weeks rather than months. We either help them become better or we ask them to walk away. When I look at our turnover, I'm very focused on flat-rate technicians. I want more flat-rate technicians. We can't get enough of them. We either hire them, and we do that just taking from our competition, just like they could take them from us, or we develop them. That's our strategy around people development. Great. And two kind of industry points that we've talked about today, just the potential for tariffs when we've seen them in the past. How has Monro reacted historically? Some of the pros or cons? If it's a big cost increase, it could be good and bad, right? So the tier one providers in the US, they might benefit big time as the industry is shifting from Chinese suppliers. If it's no longer a cost advantage, then some of the tier one providers really could light up. We have a great relationship with them. We've maintained our relationship with them, and I would expect our loyalty to benefit us maybe differently than our competition. Don't count on it, but I do expect it. And ultimately, the consumer is going to make a decision on their personal balance sheet. They want a deal. They can only spend so much. And I think it goes back to properly educating the consumer on the choices and keeping our pricing relevant. The customer is telling us, if you get over a certain price point, they just don't want it. They don't want it. Not all customers, but remember, I'm very focused on dual income under $100,000. Great. And then also electric vehicles are brought up. It will be around our keynote. Any thoughts on the impact on Monro? Love them. They tear apart tires and suspension parts as well as anybody. So yeah, of course, 15% of my business is oil change. So I'll concede that, and I'll take their tires and suspension. It's great work. It's great work. And you fix them the same way you do internal combustion engines. So it works just fine. Perfect. And then lastly, just capital allocation preferences given your current leverage profile. Yeah. No changes. Continue to fund our CapEx, which we said was $25 to 35 million for this FY 2025. Continue to pay our dividend and then continue to look to pay down debt as well as our finance lease debt. Perfect. Well, we are up against time here. If anyone has questions, feel free to stop them on the way out. But thank you, Mike. Thank you, Brian, for being here. It's a pleasure as always. Thanks again. Thank you. Thank you. Then, everyone, we'll be going into lunch now, 12:00 PM to 12:20 PM We have time for lunch. We'll meet back here for the keynote speaker. Then just one change to the schedule that I was just sent, Dorman Products, which is on the agenda for 2:30 PM, will no longer be presenting.