Good afternoon, everyone. Welcome to the RBC Consumer and Retail Conference, virtual, of course. We'd all rather be in Boston, you know, having a beer doing this. We're still virtual because of the COVID scenario. With us today, we have, for this session, the senior management team of O'Reilly Automotive. We're fortunate enough to have the CEO and Co-President, Greg Johnson, as well as Jeremy Fletcher, who's Senior Vice President of Finance and the Controller, as well as Mark Merz, who's Vice President of Investor Relations and Planning. I think I got all those titles right. That's always one of the challenges. Guys, thank you so much for being here. Always love to hear from you guys, you know, the team, et cetera. I'll jump right into it. You guys had, obviously, an incredibly strong first quarter, good start to the second quarter. Greg, if you were to kind of rank order what you think the key drivers of the business are today, kind of one, two, three, what would you point to? Great question. I think there are several drivers. Some are more traditional drivers, and some are somewhat of anomalies that we experienced in the last 12 years, or 12 months, excuse me. I think that the government stimulus first was definitely a tailwind for our business and much of retail, especially on the DIY side of the business. I would attribute some of our sales increase to that. I think there was, and has been, and generally, it's not uncommon for there to be underperformance or undermaintained vehicles or lack of maintenance. There was some pent-up demand there for that. As some of our consumers were stuck at home working from home, I think they caught up on some of that maintenance. The other thing for our business in particular, I think we took some market share from our competitors. That all makes sense. The truth is, we're like three standard deviations higher than we've ever been in terms of sales pace. Obviously, it's due to a lot of reasons. I think we probably argue a lot more personal vehicle usage because people don't want to be exposed to public transportation. One of the other topics we're starting to hear about, and I'd love your perspective, is rising used vehicle prices, right? Now, all of a sudden, you're actually getting priced out of the market on another car that you're going to buy, so you start to fix your own vehicle. Are you hearing that from any of your stores and any of your commercial customers? We are. We've heard that there is a return. During the peak of the pandemic, a lot of the jobs the shops were getting were tougher jobs to perform. They were the jobs that they may have turned down in the past or the jobs that were big register rings, but they weren't the typical maintenance. They weren't the oil changes. They weren't the brake jobs. They weren't the undercar jobs that our professional customers really built their business and their reputation on. They were the oddball jobs that, frankly, the DIY customers and light DIFM customers didn't want to perform themselves. With used car prices, first of all, there's a supply and demand issue, as we all know, new vehicle inventory, much of which is related to the semiconductor shortage. On the used car market, there is a lot of one, two-year-old vehicles, low mileage, that are being sold at or above new car prices. That's great for our business. The more maintenance cycle, or the more miles that are driven, the more maintenance cycles, the more wear and tear that are on those vehicles. We are hearing that there's more maintenance being done. It's more of the traditional type maintenance. Some of that's probably attributed to used cars. Some of that may be attributed to having a more normal winter earlier this year, putting more wear and tear on the cars themselves, things like that. Yeah, Scot, whenever you see used cars' pricing go up, and we're seeing kind of historic highs in used cars' pricing right now, people think hard about transitioning to a new vehicle. They make conscious decisions to maintain their existing vehicles for a longer period of time. I think we're seeing that right now, and that's a benefit to the aftermarket. It's the exact same dynamic we're seeing in the housing industry, right? People want to buy a new house. They want more room. They want an office, whatever it is. Now, all of a sudden, you know what? You have been priced out of the market, so you're going to add on to your home. Right. I'm not looking for an official forecast. This is purely an opinion. We will put as many disclaimers as you want around it. When you look at all the factors playing into your industry right now and the elevated trends, how sustainable do you think it is? How much longer will we have these, like I said, two, three standard deviation type kind of growth rates versus what we've historically seen? Jeremy, you haven't taken one yet. You want to take a stab? I gave him the softball. Yeah, I mean, that's obviously the million-dollar question, one that I think a lot of folks are focused on. For sure, we have seen a tailwind, and Greg spoke to it, from government stimulus dollars. We saw that at different points in time in 2020 and 2021. I think the sense would be that we're going to moderate from some of the peaks that we see when those dollars flood in. To the extent that a lot of those get pointed to some of the things that we've talked about in terms of catching up on underperformed maintenance, working on projects, more discretionary things, then that may revert over the course of time back to some norms. I think for us, what's been a positive that we've seen, I think there are a few dynamics that are pretty consistent with our history in market environments like this. Even as we talk about the used car market and the shortage of new vehicles and the willingness for people to continue to invest in their existing vehicles, there's a little bit of that dynamic that's built into the current vehicle market. A lot of that also points to, I think, the resiliency of demand and people willing, in more uncertain economic times, to hang on to their vehicles and invest in them at higher mileages. We've seen in cycles in our industry historically that as customers or as consumers go through that, it really does prove the value proposition of owning a higher mileage vehicle. The interiors and exteriors, they hold up well. They look good. Being able to invest and keep those vehicles on the road, it's an investment that pays back. As customers are pushed to that for whatever reason, be it uncertainty about the economy or the prices of used cars, whatever it might be, as they have invested in those types of activities to keep their vehicles on the road, it's given a good payback. It's a good value proposition. On the other end of it, I think we've certainly, over the last 12 months, seen shifts of demand into our sector. I think that's a big question for us as we think about some of the business that we've picked up, whether it came from larger players or smaller players. We think there's some stickiness to that because of the value proposition that we provide, particularly on the DIY side, as we've seen that surge. I can't really give you a prediction on where that sits. Especially as we moved through 2020 and started to get further and further away from the stimulus events during the course of the year last year, we're pleased. We talked about being pleased with how our business had remained strong. I think we've got the opportunities for some of that stickiness to keep us in a strong business as we move through this year. Yeah, that's. Obviously, all the caveats come into play, right? We'll have to review lots of things that we don't know about. Yep. Scot, additionally, just to add one quick thing, as we've said for a few years now, as we exit the pandemic and the strength we saw in DIY last year, our expectation is that DIFM will come back and come back to where it's outperforming DIY. That continues to be our long-term sentiment. That was actually one of my questions, just regarding, like, have you started to see, let's call it, any kind of correlation between a pickup in commercial sales, where you've seen economies start to reopen, like, you know, relaxing restrictions, et cetera? Like, you know, can you kind of point to a direct correlation on that? I don't know that I can point to a direct correlation on a market-by-market perspective. I'll tell you, generally, we remain pleased on both sides of our business at this point. If you were, and it makes sense that commercial outperformed just because you're going to be coming up against magnitudes of difference in terms of comparisons. If we were to look at it on, say, a two-year stack basis or a run rate basis, would you still expect commercial to outperform in the balance of the year? Or is that probably more of a 2022 event? As I said, it's more of a long-term play. I'm not going to speculate on exactly how DIFM versus DIY performed during the year 2021. As we've said for a number of years now, our expectation, due to the complexity of vehicles and other reasons, would be long-term for DIFM to outperform DIY. Considering the hurdles that we've faced from the past 12 months or so on the DIY side, it's a lot easier to compare on the DIFM side short term. Yeah, not only, go ahead, Mark. You were going to say something. Inherent in our initial guidance that Greg and Tom in our press release that we had back in February was our underlying assumption that professional business would outperform DIY over the course of 2021. We saw extraordinary strength on both sides of the business, but especially on the DIY side through our first quarter. As Greg mentioned earlier, we attribute a lot of that outperformance or performance above our expectations to the two rounds of government stimulus that we saw, the December-January piece and then the piece in March. Our assumptions, like Greg said, is that DIY will come back to some degree over the levels that we've seen and professional will outperform. We didn't see that through the first quarter and through April. Inherent in our updated guidance that we provided back in April was that assumption that the professional business would perform better over the course of 2021 than DIY. We'll have to see how that ultimately turns out. That's baked into our projections for the year. Yeah, that all makes sense. One of the confusions, I think, for investors is, you know, historically, you guys have had some correlation, even if it's a loose correlation, with miles driven and kind of repair activity. Yet we've seen miles driven starting to come back now. People are starting to get back to work, you know, a little less work-from-home activity, et cetera. You know, how would you guys best frame that massive divergence we've seen between accelerated auto parts sales? O'Reilly 's done a great job. It's not just you, right? You know, we're seeing it from, you know, the online guys, the banks, you name it. Yet miles driven are down. How do you guys kind of connect those dots? Yeah, you know, in a normal world, which we haven't experienced for the past 12 years, miles driven is a significant driver of sales in our industry. The more miles you drive, as I said, the more maintenance cycles, the more wear and tear on vehicles. I think when you look at 2021, you have to look a little deeper and break down where those miles were driven. In 2021, our DIY customers, most of them continued to work. Most of our DIY customers weren't blue-collar jobs. They continued to drive back and forth to work every day and continued to put miles on the road. In contrast, a lot of the white-collar workforce that may move a lot of their volume to the DIFM channel probably didn't drive the same number of miles. They're working from home. They're not driving to and from work. They're taking fewer vacations. Entertainment venues have shut down. I think there was a bigger impact to miles driven on the white-collar workforce DIFM segment than perhaps there was on the DIY segment. As people begin to go back to work, there's a lot of speculation on what percentage of that workforce goes back to work versus continues to work from home. Undoubtedly, a significant portion of that will. We feel like miles driven will improve, and it will get back closer to normal growth in miles driven. That makes sense. Shifting gears a little bit, one of the big topics throughout our conference with a number of verticals has been inflation. I know you guys talked about that. You just had a bank literally update their inflation expectations five weeks later, right? They did a pre-announcement, provide guidance, and then they decided to update their guidance because of the amount of inflation that they're seeing. Whatever you're comfortable saying, what's your latest thoughts on inflation? Is there any end to it, or is this something that is just going to continue and build and build throughout the course of 2022 or 2021, excuse me? Yeah, I can probably jump in first on that. Greg or Mark could maybe add on. I want to be a little bit careful here. We really, after our press release, don't want to talk about what we've seen since then. For sure, as we talked about on our call, inflation has been a little bit higher than what we'd seen and have some expectation we could continue to see some more inflation, really driven by all the types of things that everyone's talked about, the transportation costs, wage rates, those types of things that we're experiencing pretty widely. None of us, I think, are inflation prediction experts. We know those pressures are there. It will be, I think, interesting to see for how long they persist and what those look like, particularly with some of those drivers. From our perspective, we feel pretty comfortable with the ability of our industry, for sure, but especially of our company, to manage through those cycles, to be able to pass through price increases, to have controlled price increases from the perspective of what we'll take from our suppliers, and then just to be rational in how we think about how those pass through to our customer bases. I think we have a lot of confidence in how that works, for sure, for what we've seen over the course of the history of our company and our industry, but especially as we think back to just recently with the tariff increases that came through and the success of the industry still maintaining gross market rates and passing that through, gives us a pretty good indication that that will continue to hold as we think about what we might see for the balance of this year and past this year. Is there any concern that you're seeing anything but rational pricing in the industry? The reason I'm being asked that is, you know, one of your big competitors talked about some, admittedly, very strategic or surgical price investments on some of their commercial business. I'm just curious if that's anything that you guys have encountered or hearing anything else from the channel. Yeah, Scot, you know, we constantly monitor pricing and price movements of all of our competitors, our larger national competitors, our regional competitors. There's always someone out there that's testing, that's moving prices around. I know who you're talking about. I know what they said. You know, we monitor their pricing. They monitor our pricing. We feel like we're all maintaining and remaining very rational in our pricing and continue to pass along any input cost increases that we see. We've been very successful in doing that. I haven't seen any material changes. Got it. That's helpful. Taking it another step further, Jeremy, you actually mentioned this in terms of wages. Most people think of inflation as kind of the price of the widget that I happen to be selling. We're seeing price pressures on lots of different things. Mark mentioned the distribution costs, obviously. Wages is a big topic. I guess the question for you is, how much of an incremental pressure are you expecting on wages for this year? Is it something that, with the turnover rates that we're seeing, we may have to go a little bit higher than what we originally thought? Yeah, it's obviously something that we're monitoring pretty closely. I think it's gotten a lot more attention here recently. Frankly, we've been existing in a lower turnover, a tighter employment market, really, prior to the pandemic for a little while now and have responded well, particularly in certain jurisdictions, for some of the regulatory changes around minimum wages. That's a process that, as we've thought about our workforce, is always kind of a key for us. What do we need to do to make sure that we're operating stores that provide the very best possible customer service? That's something that will continue to be a focus for us. We'll have to respond as we need to moving forward. Having said that, I think we operate a pretty high fixed cost model. We've had the ability to manage well over the course of time to be sure that we've got the right teams in place to take care of our customers. I don't know that we would anticipate anything is going to be significantly different in how we would execute that strategy as we move forward this year. It's certainly an item that I think everybody is keenly aware of and focused on as we want to make sure that we're doing the right thing for our teams and for the long term of our business. That's really how we think about how we staff and the people we have in our stores. This is really not, I mean, it's something that's been publicly talked about a lot. It's really not a new phenomenon. There are a lot of markets out there that have been moving towards or above that $15 mark for a few years now. If that were to change federally, it's going to change over time. We would address it as we have in those markets where we've seen the pressures thus far. That all makes sense. That was actually my next question, so thank you for that. One of the things you guys have talked about, and you actually started out some of the conversation, is you guys have been gaining market share. You know what? I guess the first question is, I think I understand why you've been gaining market share, but where do you think it's coming from, right? You look at the other kind of big public guys, and you all are talking about kind of market share gains. Is it all coming from warehouse distributors? Why do you think it may be occurring, et cetera? I think that would be helpful for the audience. I think especially over the past 12 months with the pandemic, it's coming from two primary areas. One would be just some of the smaller warehouse distributors that have struggled. They don't have the strength, buying power, supply chain power that we have. I think some of it would be coming from the smaller regional players. Frankly, I think some of it's coming from big box retail. I think that a lot of consumers, rather than walk 200 yards to the back corner of a big box store to buy a battery, have figured out that they can walk into our store or do this transaction curbside in our parking lot and not only buy a quality battery at a competitive price, but we'll put it in the car for them free. We'll do the install. I think most of that has come from those two channels. It's hard to tell exactly where it comes from. That's where we feel like a lot of that market share gains come from. That was actually, I think you started to reference it actually there, Greg, you know, we have heard about product shortages in lots of different verticals. If you get one more set of brake pads coming off a production line, you're not selling it to, you know, Chick-fil-A Auto Parts, I'm sure, right? It's going to go to an O'Reilly or one of your big competitors. How long do you think that lasts? Do you think you can potentially see some of those share gains that you've been able to gather once the supply chains start to straighten out? Do you consider those share gains more sticky? We hope they're sticky. You know, we're working hard. If you ask Brad Beckham, our EVP of Store Operations and Sales, he's telling you that his guys are out there on the street every day, making sure that as much of that volume we retain as we can. It's a tough market out there. It's very challenging, both with our national competitors and our smaller regional competitors. You know, we lead with service, and we provide a very high level of customer satisfaction in our stores. We'll continue to do that and continue to try to not only retain that volume but grow our volume year-over-year. Is the inventory flow or supply challenges getting any better than, say, six months ago? Is it the same? Is it getting worse? We didn't face as many inventory challenges as many might think. We had a handful of suppliers that had issues. Now, there are containers that are backed up in the ports. The lead time from China is greater than it once was. As I said, we require most of our international suppliers to buffer inventory here in the States for us. It's not a direct import for a lot of our larger suppliers. It comes from whatever country into the States, into their distribution center, and then they replenish us from there. We've got a buffer built in. To say, again, I've said this before as well, our supply chain wasn't built for the volumes that we've experienced. We've created some problems within our own supply chain with our DCs getting backed up on volume. I will tell you, that is improving a great deal. Product will continue to flow. We're still five to seven suppliers that are having fill rate issues. Got it. OK. I did want to shift towards e-commerce. I think, Greg, before you chimed on, you know, we do have at our conference a couple e-commerce, you know, kind of e-commerce-only players in the auto parts segment. I guess one of the questions is, you know, and I know e-commerce is still a small part of the business for you guys. A, could you, you know, start to size it for us, number one. Number two, you have talked about growing faster than the bricks-and-mortar channel, which makes sense to me. Do you think that accelerated growth pattern is, you know, kind of here to stay? Is it kind of a one-time pandemic-type phenomenon? It definitely escalated growth during the pandemic, not only for our industry, but in retail as a whole. I think we all know that. You know, Scot, what I would tell you is, when you look at the growth that we've had in e-commerce, 75% of our e-commerce volume was pickup in store, shipped to store, or curbside. That means that 75% of the customers that chose to transact with us online did not get the discount that we offered online to ship that product to their home but paid a full price to transact in our stores. That tells us there's still that component of immediacy of need that they need that part before tomorrow morning. They still need our assistance to make sure they've got the right part, they've got everything they need to complete that job before they start the job at home. It's really the same thesis we've been talking about for a number of years. The percent of our business that ends up in our store and either shipped to store, pickup in store, or curbside now has grown from about 2/3 to about 3/4 during the pandemic. Wow. When you look at your DIY sales, how much of those sales would you view as immediate need, right? Like, I need a starter, alternator, battery, or whatever versus, you know, I could order something on Tuesday and work on it on my Saturday project. Yeah, you know, we don't sell iPhones and G-Wiz items. We sell parts to solve problems. Right. There are really two types of products you buy. You either buy a product because your car is broken and you have to fix it now, or you buy a product to complete a repair that a part is failing, it's a maintenance item, or something that you can plan for. I don't know what that breakdown is because, frankly, in any given segment, there are parts in those segments that may fall into either category. Based on the trends of customers continuing to come to our stores, I'm going to say that immediacy of need is a significant part of that. Got it. Just because we're starting to run out of time here, unfortunately, I'd love another hour. One of the big topics for investors these days is ESG. I guess one of the questions for you guys is, what are the top two or three ESG initiatives you'd really like to highlight for the investors listening in today? Scot, when we think about ESG as a company, it's kind of interesting that over the last couple of years, reporting around ESG has become top of mind for investors. For O'Reilly, the concepts of ESG just have and always will be part of our culture. From an environmental standpoint, we do massive amounts of recycling. We're constantly looking at ways to improve the fuel economy in both our over-the-road fleet as well as our store vehicle fleet. We've made significant investments in solar and wind farms. We continue to look at opportunities to invest in those types of renewable energy sources. From an S standpoint, human capital is our single most important asset as a company. We're always investing in promote from within, training, recruiting, giving all of our team members the opportunities from a diversity and inclusion standpoint to work-life environment, training to better do their jobs. From a governance standpoint, good corporate governance has always been a part of everything we do. Over the last several years, we've made significant enhancements in the structure of our board. We have four new board members in the last four years. Three of the new board members are female. One of the new board members is ethnically diverse. We continue our outreach with our shareholder base. At least once, if not twice a year, we proactively reach out to at least one-third of our outstanding shareholders to discuss items they would like to see in our sustainability report. We're very happy that we've produced two sustainability reports. We're currently working on the third. Our first sustainability report was more focused on environmental because that was the engagement focus that we had at the time. The second one was more focused on human capital and additional human capital disclosures because that was the engagement. Through the process of the current sustainability report, which we hope to release in early fall, diversity and inclusion is a larger focus of that report, again, because that's the engagement process and things that our shareholders wanted to see. We'll continue that process into the future. Those are some of the high-level items that we're working on right now. That's fabulous. Unfortunately, like I said, we're out of time. Thank you again for spending some time with us and our investors. Best of luck in today's afternoon meetings. Thanks, Scot. Thanks, guys. Yep.