Welcome to the O'Reilly Automotive, Inc. third quarter 2023 earnings call. My name is Holly, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press star one on your touch tone phone. I will now turn the call over to Jeremy Fletcher. Mr. Fletcher, you may begin. Thank you, Holly. Good morning everyone, and thank you for joining us. During today's conference call, we will discuss our third quarter 2023 results and our outlook for the remainder of the year. After our prepared comments, we will host a question-and-answer period. Before we begin this morning, I would like to remind everyone that our comments today contain forward-looking statements, and we intend to be covered by, and we claim the protection under, the Safe Harbor Provisions for Forward-Looking Statements contained in the Private Securities Litigation Reform Act of 1995. You can identify these statements by forward-looking words such as estimate, may, could, will, believe, expect, would, consider, should, anticipate, project, plan, intend, or similar words. The Company's actual results could differ materially from any forward-looking statements due to several important factors described in the Company's latest annual report on Form 10-K for the year ended December 31, 2022, and other recent SEC filings. The Company assumes no obligation to update any forward-looking statements made during this call. At this time, I would like to introduce Greg Johnson. Thanks, Jeremy. Good morning, everyone, and welcome to the O'Reilly Auto Parts third quarter conference call. Participating on the call with me this morning are our Co-Presidents, Brad Beckham and Brent Kirby, as well as Jeremy Fletcher, our Chief Financial Officer. Greg Henslee, our Executive Chairman, and David O'Reilly, our Executive Vice Chairman, are also present on the call. I'd like to begin today's call by congratulating Team O'Reilly on outstanding results in the third quarter and express my deep appreciation to our team of over 88,000 professional parts people for their steadfast dedication to our customers. This unwavering commitment to excellent customer service is the hallmark of O'Reilly Auto Parts and the key to earning our customers' business every day. Our team's ability to deliver sustained, profitable growth is evidenced by a robust 8.7% increase in comparable store sales, coupled with a 17% increase in diluted earnings per share for the third quarter. Our results have exceeded our expectations throughout the year, driven by the team's high level of execution. Service and product availability are critical pieces of our value proposition, and our ability to remain intensely focused on these fundamentals has continued to drive growth on both the professional and DIY sides of our business. As we announced in July, upon my retirement in January, Brad Beckham will be promoted to the position of Chief Executive Officer, and Brent Kirby will be promoted to the role of Company President. Brad and Brent are tremendous leaders who bring world-class ability, experience, and passion to their new roles. Even more importantly, Brad and Brent are incredible standard-bearers of the O'Reilly culture, and I'm very excited about what our future holds under their leadership. Our transition of the operations of the company to Brad and Brent has progressed smoothly and seamlessly, and as a result, today's earnings call represents my last call as CEO. As such, it is appropriate for me to leave the bulk of our discussion of the third quarter results to Brad, Brent, and Jeremy. But before I turn the call over, I would like to thank our shareholders for their continued confidence in and support of our company during my tenure as CEO. Finally, I'd like to again thank Team O'Reilly for your hard work and commitment to our customers. It's been my absolute honor and privilege to work alongside you for the last 41 years with a front-row seat to see you achieve so many incredible milestones along the road to success for O'Reilly Auto Parts. Even though I won't get to actively participate in the next chapter of our company's success, I'm still very excited for the many opportunities ahead and look forward to watching our company's continued growth and future success. I'll now turn the call over to Brad Beckham. Brad? Thanks, Greg, and good morning, everyone. I would like to begin by congratulating Team O'Reilly on another excellent performance in the third quarter. The ability of our team to deliver continued industry-leading sales performance requires a consistent and intense focus on our culture and the fundamentals of excellent customer service. I would like to thank all of our team members for their hard work, commitment, and dedication to our great company. Now, I would like to walk through the details of our sales performance for the quarter on both the professional and DIY sides of our business. We spoke on our last call to the strong start to the quarter in July, driven in part by extreme heat in many of our markets, as we were pleased to see these very strong volumes carry on throughout the quarter. From a cadence perspective, we saw a similar top-line outperformance in each month of the quarter as compared to both the expectations we built into our plan coming into 2023 and the updated guidance we provided on last quarter's conference call. As we have discussed throughout 2023, our prior year comparisons get more challenging as we move throughout the back half of the year, and this dynamic was reflected in the cadence of our comparable store sales in the third quarter with our strongest comps for the quarter in July and August. However, on a two-year stacked basis, our performance was much more consistent through the quarter, with September only slightly below the full quarter performance due to a moderation of the hot weather benefit we realized earlier in the quarter. While we did see outperformance during the quarter in categories impacted by heat, such as cooling and HVAC, we also experienced broad strength in application-specific hard part categories, as well as maintenance categories such as oil and filters. These dynamics give us confidence that while we did benefit from weather, it was not the primary driver of our above-expectation results, and the sales we are generating in failure and maintenance categories indicate a healthy level of broad-based consumer demand. Our professional business continues to be the more significant out performer, and our team was able to deliver another quarter of mid-teens comparable store sales growth in our professional business in the third quarter. This outstanding growth was in line with the professional sales increase we achieved in the second quarter, while facing increasingly challenging prior year comparisons. We are extremely pleased with our team's ability to gain share through consistently executing our business model and providing industry-leading value to our professional customers. Our expectation is to continue to grow our share in the professional business as we see plenty of opportunity in both new and existing markets to consolidate the overall DIFM market. Turning to our DIY business, we were pleased to generate solid comparable store sales growth, with our top-line growth consistent with the first half of the year, even as we saw an expected moderation in the benefit from inflation. In line with the trends we have seen this year, our DIY comparable store sales growth has been driven primarily by increased average ticket values. However, we were pleased to see positive DIY ticket count comps in the third quarter. Our teams continue to execute our dual market strategy, driving market share growth in our DIY business alongside our robust growth in professional. However, our portion of the total DIY market share in the U.S. is still relatively low, and we see continued DIY growth as a tremendous area of opportunity for our company. Now, I would like to provide some color on our average ticket and ticket count performance. Average ticket growth was again in the mid-single digits on a combined basis and was the slightly larger share of our comparable store sales increase. While we are seeing the expected reduced benefit from same-SKU inflation as we move throughout the year, our moderation in total average ticket growth has not been as significant due to offsetting strength we have seen from parts complexity and product mix. Moving forward, we expect a more normalized same-SKU inflation benefit, but are confident that future average ticket growth will be supported by increased parts complexity, which has been the primary historical driver of our average ticket. Even though average ticket growth was the larger contributor to our comparable store sales growth, we are very pleased with our ticket count comps, which was the larger contributor to the outperformance versus expectations. Our team's ability to outhustle and outservice our competition for this increased traffic volume is paramount to ensuring these share gains translate into repeat business. It has never been more important to ensure that we have highly trained teams of professional parts people, supported by superior product availability in every single one of our 6,000 plus stores. As I finish up our remarks on sales performance in the quarter, I would like to highlight our updated full-year sales guidance. We have increased our full-year comparable store sales guidance to a range of 7%-8% from our previous range of 5%-7%, and increased our total sales guidance to a range of $15.7 billion-$15.8 billion. This update is reflective of our year-to-date performance through today's call, including a solid start to the quarter with October trends in line with how we exited the third quarter. As we finish out 2023, our fourth quarter reflects our most challenging comparisons of the year, as we lap the 9% comparable store sales increase in the fourth quarter last year and expect to see a fully normalized same-SKU benefit. Our outlook for the remainder of the year is consistent with the guidance we have maintained throughout 2023. While we have been very pleased with the degree to which our performance has outpaced our expectations in the first nine months of 2023, we are always cautious as we approach the last few months of the year, which historically can be volatile due to variability in winter weather and pressures consumers can face during the holiday shopping season. As a reminder, our prior year comparisons are the most challenging in December, as we benefited from broad-based strength in weather-related categories at the end of 2022. Against this backdrop, we maintain a positive outlook on the fundamentals of our industry. We are confident that the key demand drivers for the aftermarket, including steady recovery in miles driven and a very favorable U.S. vehicle fleet dynamics, are in place to support steady growth moving forward. We also believe that our customers have remained resilient and are continuing to prioritize the maintenance of their existing vehicles in order to avoid taking on a payment for a higher priced, newer vehicle. As you have heard from me already today, we see lots of opportunities in our markets to grow faster than the industry. Our team is charged up by the results we are seeing from our solid execution of the basic fundamentals of our business that translate to success. Next, I would like to take some time to discuss our SG&A performance in the quarter. SG&A, as a percentage of sales, was 30.1%, a deleverage rate of 29 basis points from the third quarter of 2022, driven by an increase in SG&A per store of approximately 8.5%. Our SG&A growth in the third quarter was above our expectations, so I want to provide some additional color on what drove the results in the third quarter. As we saw in the first half of 2023, the majority of our outsized year-over-year SG&A growth, as compared to our historical growth rates, was the result of planned investments and initiatives targeted at enhancing our long-term operational strength. Our spend on these items was largely in line with our expectations coming into the quarter, and we remain pleased with the positive impact we are generating by reinvesting in our stores, technology, and most important, in Team O'Reilly. While these initiatives continue to play out as planned, our total SG&A dollar spend per store in the third quarter was higher than we expected coming into the quarter. This was driven by incremental costs necessary to support our significant comparable store sales outperformance, but which also resulted in better leverage of SG&A expenses than we saw in the second quarter. Our focus remains on relentlessly pursuing the excellent customer service that strengthens the long-term relationship we have with our customers, and we will continue to be aggressive where we see opportunities to accelerate top-line growth and, in turn, create leverage over time, driving long-term returns. Based on our results in the third quarter and expectations for the remainder of the year, we now expect to see SG&A per store increase 7%-7.5% for the full year. With this increase from prior guidance, we still expect our full year operating margin to come in within the range of 19.8%-20.3% of sales, driven by leverage on our strong top-line results. Expense control remains as important to the O'Reilly culture as it always has, and we will be judicious in how we manage our spend to ensure we are seeing long-term results from the investments we make in the business. This focus on profitable growth has drove our 17% increase in third quarter diluted earnings per share. We are updating our full year EPS guidance to $37.80 to $38.30, representing an increase of $0.75 at the midpoint, reflecting the strong performance in the third quarter. Before I turn the call over to Brent, I would like to again thank Team O'Reilly for their hard work and dedication to the O'Reilly culture. Greg has been a tremendous leader for our company, an incredible mentor to me, and is a tough act to follow. But I am very excited for the future of our company, and our entire team is committed to our company's continued success. Now, I'll turn the call over to Brent. Thanks, Brad. I would like to echo Greg and Brad in congratulating Team O'Reilly on the outstanding performance in the third quarter. The continuation of our strong sales performance and proven ability to outperform the market is a testament to our team's unwavering commitment to excellent customer service. I want to thank all of our team members for their dedication to our company and to our customers. Now, I will cover our third quarter gross margin results, what we are seeing in the competitive environment, and provide some updates on our store and distribution growth, inventory investments, and capital expenditure plans. Starting with gross margin. Our third quarter gross margin of 51.4% was 46 basis point increase from the third quarter of 2022, at just above our expected range. We are pleased with the stability of our gross margin results as our third quarter continued the strong trend we saw in the second quarter. Our gross margin for the third quarter faced pressure from the sustained, strong performance in our professional business, creating a customer mix headwind. But we have been able to offset these headwinds through improved acquisition cost and outstanding support from our supplier partners. Pricing to both DIY and professional customers has remained rational within the industry. We continue to see modest inflation in the third quarter and remained very successful in passing along increases in product acquisition costs and other inflationary pressures in selling price. While our quarter-to-quarter gross margin rate can see normal fluctuations from seasonality and product sales mix, and leverage of distribution costs relative to overall volumes, the stability of our results in light of the share gains we are experiencing demonstrates our team's ability to win share through service and product availability. As a result of our solid year-to-date performance, we are maintaining our full-year gross margin guidance of 50.8%-51.3%, but would now expect to come in within the top half of this range. Inventory per store finished the quarter at $758,000, which was up 4% compared to the beginning of the year. We would now expect our average inventory per store increase to finish the year in a range between our original guidance of 2% growth and the current levels, driven by our continued opportunistic investments to support our sales momentum. Our AP to Inventory Ratio at the end of the third quarter was 134%, in line with the beginning of the year and slightly better than expectations, driven by strong sales volumes and inventory turns. We now expect to finish 2023 at a similar level. The health of our supply chain and resulting store in-stock positioning continues to be a competitive strength. Optimizing our assortments across our DC, hub, and store network, while simultaneously partnering with our supplier community to achieve industry-leading fill rates, is absolutely playing a key role in our exceptional sales results. We continue to regard inventory availability as a critical priority for our business. Alongside the investments we are making in inventory, we also remain focused on leveraging the benefits of the tiered nature of our distribution model. This strategy has been an important aspect of our supply chain for many years and begins with placing distribution centers in large metro areas to provide same-day availability to a wide range of SKUs for our customers. Strategically located Hub stores augment our SKU availability on a more localized basis and represent the very important second tier within our distribution supply chain. We continually evaluate this network, including the number, location, and size of our Hub stores, to ensure that all our stores have the best access to inventory in their respective markets. Next, I would like to discuss our capital investments and expansion opportunities, beginning with the investments we are making in our distribution network. As we discussed on last quarter's call, we are very pleased with the successful opening of our Guadalajara, Mexico, D.C. in July, but are also excited on today's call to announce two additional expansion projects that we currently have underway. First, our distribution teams are actively working on a relocation of our Atlanta D.C., which is a large project that will enable expanded, more efficient store servicing capabilities within that market, as well as providing direct import processing capability within this new facility. This new 690,000 sq ft building is expected to be complete by the end of 2024 and will increase the number of stores we can support in this critical market by 100 stores. Next, we have an exciting distribution expansion project that is in progress in Stafford, Virginia, where we have purchased a site and began construction on the large new distribution facility that will service the Washington, D.C., Maryland, and Virginia corridor. The new DC will be approximately 530,000 sq ft, and our initial plan is to build out capacity to service 350 stores. We anticipate this distribution center will be open and operational by the middle of 2025, and we could not be more excited about the store development opportunity this provides us in what is largely an untapped market area for O'Reilly today. Our distribution center teams are diligently executing on these projects and are enthusiastically looking forward to further expanding our DC footprint and our industry-leading parts availability. Turning to store growth and expansion, we successfully opened 40 stores during the third quarter, bringing our year-to-date total to 140 net new store openings for 2023. Our team is confident we will achieve the goal of 180-190 net new store openings for 2023. As we noted in our press release yesterday, we announced our 2024 new store opening target of 190-200 net new store openings. Our strong new store performance continues to prove that our investments in both new stores and the necessary distribution infrastructure to support those stores is an attractive use of capital. Total capital expenditures for the first nine months of 2023 were $754 million, a considerable increase over prior year, but reflective of the attractive opportunities we see to deploy capital against projects and initiatives to drive long-term growth and enhance our competitive positioning. Included within our press release yesterday was an update to our full-year capital expenditure guidance to a range of $900 million-$950 million from the previous range of $750 million-$800 million. The primary driver of this increase was the progress that we've made on the new Virginia distribution expansion project, as well as a higher mix of owned new stores and the pace of investment in technology and store infrastructure initiatives. To close my comments, I want to once again thank Team O'Reilly for their hard work and continued dedication to our customers. Now, I will turn the call over to Jeremy. Thanks, Brent. I would also like to thank Team O'Reilly for their continued hard work and outstanding performance in the third quarter. Now, we will cover some additional details on our third quarter results and guidance for the remainder of 2023. For the quarter, sales increased $405 million, driven by an 8.7% increase in comparable store sales and a $78 million non-comp contribution from stores opened in 2022 and 2023 that have not yet entered the comp base. Our third quarter effective tax rate was 23.2% of pre-tax income, comprised of a base rate of 24.3%, reduced by a 1.1% benefit from share-based compensation, with both of the components of our rate in line with the third quarter of 2022. Our third quarter base tax rate was in line with our expectations, with the total effective tax rate below our expectations due to higher-than-planned benefits from share-based compensation. For the full year of 2023, we continue to expect an effective tax rate of 22.5%, comprised of a base rate of 23.4%, reduced by a benefit of 0.9% from share-based compensation. Our fourth quarter effective tax rate is expected to be lower than the other three quarters due to the totaling of certain tax periods. Variations in the tax benefit from share-based compensation can create fluctuations in our quarterly tax rate. Now, we will move on to free cash flow and the components that drove our results. Free cash flow for the first nine months of 2023 was $1.7 billion versus $1.9 billion in the same period in 2022. The reduction was the result of the increase in capital expenditures Brent discussed in his remarks, as well as a lower working capital benefit from reduction in net inventory this year versus 2022. These headwinds were partially offset by growth in income and a benefit from favorable timing of tax payments and disbursements for renewable energy tax credits. For 2023, we continue to expect free cash flow at a range of $1.9 billion-$2.2 billion, with an increase in expected cash flow from operations offsetting the increase to our CapEx guidance. Moving on to debt. We finished the third quarter with an adjusted debt to EBITDA ratio of 1.93x, which is up compared to our end of 2022 ratio of 1.84x. The increase in total indebtedness was comprised of borrowings under our commercial paper program, which we successfully launched in the third quarter. We continue to be below our leverage target at 2.5 times and plan to prudently approach that number over time. We continue to be pleased with the execution of our share repurchase program, and during the third quarter, we repurchased 852,000 shares at an average share price of $938.11, for a total investment of $800 million. Year to date, through our press release yesterday, we repurchased 3.4 million shares at an average share price of $879.74, for a total investment of $3 billion. We remain very confident that the average repurchase price, inclusive of the current excise tax cost, is supported by the discounted expected future cash flows of our business, and we continue to view our buyback program as an effective means of returning excess capital to our shareholders. As a reminder, the updated EPS guidance outlined by Brad earlier includes the impact of shares repurchased through this call but does not include any additional share repurchases. Finally, before I open up our call to your questions, I would like to again thank the entire O'Reilly team for their continued dedication to the company's long-term success. This concludes our prepared comments. At this time, I would like to ask Holly, the operator, to return to the line, and we will be happy to answer your questions. Thank you. We will now begin the question-and-answer session. If you have a question, please press star one on your phone. If you wish to be removed from the queue, please press star two. We ask that while posing your question, you please pick up your handset if listening on speakerphone, to provide optimum sound quality. Please limit your questions to one question and one follow-up question. Once again, if you have a question, please press star one on your phone. Our first question for today is coming from Michael Lasser at UBS. Good morning. Thanks a lot for taking my question. Your guidance, implied guidance for the fourth quarter, implies a significant slowdown in the business. Outside of the uncertainty associated with the weather and the holidays, is there anything that you would point to that would have influenced such a slowdown or deceleration in the performance of the comp? Hey, good morning, Michael. It's Brad. I'll take a stab at that and see what- Okay. - the other guys want to follow up with. Great question. As you know, Michael, I think generally speaking, directly to your question, the answer is not really. You know, as you know, as we always say, the fourth quarter can be the most volatile from, you know, the weather standpoint, from the holidays. I think the key is, you know, just to remind you what I said earlier, that, you know, we feel really good about how October is going so far. You know, generally, the first few weeks of the quarter have been, very consistent with what we saw with the exit rate, especially from a, you know, two- and three-year stack basis. But we still have almost half the quarter to go. December is a huge comparison, and, you know, we just want to make sure that we're just being cautious overall. But generally speaking, we're really happy with the way volumes are holding up and really excited to do everything we can to finish the quarter strong here. Yeah, yeah, maybe, Michael, the only thing I would add is just the characterization of a significant slowdown in our business. You know, we've really spoken all year to just the timing of how that one-year comp is going to look as comparisons just naturally get more challenging as we move through the year. You know, while there is, you know, some time left in the quarter, and we've been pleased with our performance all year long, you know, what we're anticipating as we finish out the year is pretty consistent with where we've been. It's not reflective of anything that we're seeing when we think about our sales from a week-to-week volume, understanding the seasonality of the business as we moved into the fourth quarter. You know, unfortunately, we're going to have to get some really tough compares, but that's also a good spot to be in, and really nothing has changed in how we think about the current pace of the business. I got you. For O'Reilly, tough compares is a way of life, but that's okay. My second question is on the outlook for SG&A spending. It's obvious that the returns on the investments that you're making have been quite productive in light of the market share that O'Reilly has been achieving. Would you expect a similar rate of SG&A dollar growth on a per store basis moving through 2024? Are there opportunities to invest such significant amounts that would generate such similar returns? Thank you. Thanks, Michael. Another good question there. Well, as we've said, you know, we're extremely pleased with the returns we've seen from investing back in the business. As you know, you know, there's a big difference for us at O'Reilly between investments and judiciously managing our expenses. Like I said earlier, expense control is a huge part of what we do. You know, we never like to deliver, except in the case of this year, when we know that we were playing from a position of strength, and we knew there were some areas that are really just paying off. We're very happy with the ROI we've seen on all our initiatives, where we've reinvested back in the business this year. As you know, a lot of that is some catch-up, you know, from, from COVID, the years of COVID, and everything that we wanted to spend that we didn't quite get to. So, you know, Michael, honestly, you know, we're in the middle of working on our plan for 2024. That always starts with the top-line number, and then we back into what we feel like is the right thing to do for short, mid, and long term, especially when it comes to those mid and long-term returns. And so, we look forward to, you know, talking about our, our plan in February 2024, but we just wanna be careful talking about 2024 just yet. Understood. Good luck you did a great job. Thank you so much. Thanks, Michael. Your next question is coming from Bret Jordan, from Jefferies. Hey, good morning, guys. Morning, Bret. Morning, Bret. You know, as you guys continue to gain market share in the space, could you talk a little bit about where you're seeing both that coming from, you know, smaller DIFM independents or national accounts? And then, I guess, you know, obviously, there's got to be a shared donor as well. So is that also the smaller WDs that you're picking up from, or are things changing, you know, in market share relative t o larger peers? Hey, thanks, Brett. Another good question. You know, honestly, Brett, as we—you know, you've heard us say for a long time, it's always hard to tell, you know, all the moving pieces. You know, we have extreme, you know, respect for—we take all our competitors extremely seriously. The, you know, the big four, the independents, we have tough, tough competitors on both the DIY and the professional side of the business. You know, we spend our time focusing on, you know, we're our—we are our own worst competitor, meaning that we always have execution opportunities, we always have areas to get better. You know, honestly, to try to answer your question the best I can, you know, we feel like it's a little bit of all the above. You know, we feel like that, everything from store operations, execution, service levels, continuing to work on our retention and turnover, got to brag on our supply chain team, continued improvements with our product availability, our assortments, and just really getting away from the COVID hangover, so to speak, when it comes to our supply chain. Brent and the entire supply chain team have done just an incredible job. But generally speaking, I think it's a little bit of everything you mentioned. I think, pretty broad-based from a customer standpoint, and we think it's probably fairly broad-based from where it could be potentially coming from, from a competitor aspect as well. Okay. And I guess sort of a follow-up to that, you know, now you're seeing there's such big dispersion between execution on the distribution side. Are there any increased M&A opportunities, you know, either large regional distributors that are private, that you sort of see, too, you know, maybe fill in some of that geographic white space you have out there, you know, around sort of between the Midwest and these Virginia, D.C.? Yeah, sure. I'll, Brett, I'll lead that off and then let Brent hit on kind of the first part of your question there. I'll just speak maybe to the M&A opportunities. You know, we're, as you know, we're always looking for opportunities when it comes to greenfield expansion, but also strategic acquisitions that make a lot of sense from acquiring not only real estate and locations, but great teams of parts people that understand the professional side of the business and, you know, teaching those type companies how to be a dual market company. And so, you know, we're hopeful that maybe as things evolve the next year or two, you know, valuations and things like that could look a little bit more attractive than they have the last couple of years. Still a little bit hard to say, but absolutely, you know, we're always looking at, you know, the one-store deals, our jobber customers that we still have, that potentially don't have an exit plan, you know, one-store deals, two-store deals, all the way up to some of the regional things. You know, we're hopeful that as we continue to get more aggressive in the upper Mid-Atlantic and the true Northeast, that some other opportunities come to light. Yeah, and, Bret, I would just add maybe on the distribution and supply chain side of things, you know, certainly the exciting news about our Stafford facility that I talked about in my prepared comments, you know, we're super excited about getting another large DC in the Mid-Atlantic. We see that as a big, you know, untapped geography for us, and we're certainly investing to begin to take more advantage of that opportunity. And, you know, when you think about our distribution infrastructure, you know, for us, it's something we're constantly looking at. You know, talked about the strength of where our DCs are located and, you know, our DCs are where the cars are, where the people are, and, you know, we don't see that as an opportunity necessarily to, you know, use 3PLs or y ou know, we wanna own that, we wanna run it, we wanna operate it, the way we always have. And we're always looking at, you know, hub store opportunities and how they augment the tiering of our DCs and where they are, and how we can, you know, be first in class in every market that we operate in, in terms of parts availability. So we're gonna continue to do that. We certainly see that geography as a continued opportunity moving forward. Great. Thank you. Yep, thank you, Bret. Thanks, Bret. Your next question for today is coming from Daniel Imbro from Stephens. Yep. Hey, good morning, everybody. Thanks for taking our questions. Good morning, Daniel. Follow up on Bret's question about market share. Just curious, how's the onboarding of the new customers progress? Any hiccups or learnings as you've won so much business so quickly, that any bottlenecks that are limiting growth, is that kind of behind some of the infrastructure investments you guys are talking about? Yeah, maybe I'll start there. This is Jeremy, and a little bit of interference on your sound, but I think the question really focused around what, you know, what have we learned as we've seen the share accelerate within our business, and how is that impacting how we move forward? You know, for sure, the increase volume that we're picking up, you know, those are completely new customers that are unfamiliar to us in the markets that we're in. You know, every market we exist in, we spend, on the professional side of our business, considerable amount of time understanding the market, understanding the shops, formulas, relationships. You know, for us, the focus is always on how do we create value for those customers? How do we ensure that we're partnering with their businesses to help them be successful, even as we grow business? For sure, as we've seen more and more opportunities to earn business over the course of, really the last several years, during the course of the pandemic, but especially as we've seen the ability to grow on top of growth with those customers, our touch points, when we get that extra opportunity to provide outstanding service are just critical to being able to compound that growth. And I think as much as anything, what we've seen as we move through the last several quarters is our ability to provide excellent service to really demonstrate the values that Bret talked about earlier, that we can provide excellent, excellent service, great informed technical people within our stores that understand the business, can support the work of our professional customers, incredible parts availability, and just a broader support has provided an excellent value and continues to give us more and more opportunities. That's helpful. And maybe I just want to dig into the SG&A spend a little bit more. Are there any specific initiatives you can unpack around maybe what you're spending on, whether it's tech for your professional customers or delivery efficiency? Just anything to help unpack or kind of clarify what you're spending on, so we can better understand how it's driving sales. Thanks. Yeah, I mean, I think the general things that we've talked about are similar to how we've spoken to this item throughout the course of the year. And we're always, I guess, somewhat reluctant to get too far down in the weeds. We think they're great investments for our company, and we, you know, just competitively, we want to see them play out for a long period of time. For sure, we've made a concerted effort to continue to invest within our team. And we've talked about enhanced benefits, PTO and 401(k) improvements, and just more broadly, how we think about how our store managers manage their workweek and things along those lines. We continue to invest in the image and appearance of our stores and our fleet vehicles, and ensuring that we get the safest vehicles on the road possible. And then technology continues to be a huge ongoing investment as we think about all areas of the business where we can bring better tools online to support the work that our store teams are doing in taking care of our customers. Fair enough. We'll congratulate on the results, and thanks a lot. Thanks, Daniel. Your next question for today is coming from Zach Fadem from Wells Fargo. Hey, good morning, guys. I think we're getting a lot of mixed data points on the state of the industry, and putting your outperformance aside for a minute, curious to hear if you think the broader category is slowing or not, and to what extent the impact of a broader consumer slowdown would have on the aftermarket. Yeah. Hey, Zach, it's Brad. I'll take a stab at that, and then I may flip it over to Brent to talk generally about, you know, what we're seeing and not seeing on some of those fronts. But, you know, generally speaking, Zach, you know, we're just not seeing that. You know, we, you know, as part of our results, as you can imagine, you know, it's just hard for us to say that we're really seeing that. You know, when I look at, you know, our positive DIY ticket count that I cited in our prepared comments, I mean, that's encouraging for us. You know, we're very excited about the execution of our teams on the DIY side as well as the professional side. You know, when I review the data that comes in every week from our sales team on the professional side, you know, we have all our comments and sales call recaps that come through our CRM. You know, that's not to say that, you know, that within the service space, that I see comments that some shops may be a little bit slower than other shops, but it's just hard for us to say, with our results and what we hear and see on the street every day, that there's an overall slowdown. We're just not seeing that. Again, there's times you see that some shops may be seeing a little less car count than others, and just like on the service side, or excuse me, just like on the, the aftermarket parts side of our industry, you know, there's some service providers that are taking more share, and there could be some that are losing some share. So, you know, it's, it's just hard to parse all that out and say that we're seeing an overall slowdown, when we're really just not seeing that. Yeah, and Zach, I would add, too, I mean, you know, to echo Brad's comments, but it's really a tremendous testament to the culture and to the execution of our teams out there, our sales teams, our distribution center teams. I mean, they have just executed to an outstandingly high level and continue to. And not that we're immune from any of those things that may happen in the greater macroeconomic, you know, background, but we just have not seen the effect of that, you know, through the Q3 results, and we're not seeing it as we get into Q4 at this point. So we're gonna continue to stay focused on executing, serving the need, and meeting the demand out there, and we feel like good things will continue to follow. Yeah, Zach, maybe the only thing- Got it. I would add to that is, I'm sorry, just, just one more thing. I know you, you kind of talked to how do we think about that moving forward. I think from a long-term perspective, our, our, our view on the resiliency of our industry is unchanged. We've been, we've been through different cycles of, of, of challenges to the consumer in the past, and there are always the potential for short-term shocks and impacts and fluctuations that might last a quarter or two, and we're, we're always cautious in how we, we, we think about that near-term outlook. The underlying core drivers of demand within the aftermarket continue to be resilient and strong. The value proposition that investing in your existing vehicle has for a consumer is very attractive. We think it continues to get more attractive with the vehicle dynamic, and people are still, you know, using their cars for so much of what encompasses daily life with miles driven, you know, steadily expected to increase. Those things are all, I think, positive as we think about really the longer term, and that's really where our focus is as we think about building our business. Okay, great. That's great color. And with respect to competition, it seems like the WDs had been operating with one hand tied behind their back in the early days, post the pandemic. But with those businesses now back in stock and ready to recapture some of the share that they lost, do you think we could be entering a period of choppier pricing, particularly as we lap the double-digit inflation in the industry? Yeah, Zach, this is Brad. Well, the first thing I would say is I know we all in the industry, anecdotally, you know, felt like potentially some of the smaller players could've had a little bit more adversity when it came to supply, you know, during the pandemic, and I think that was probably true. And I think it's probably accurate, for the most part, looking across the market, that they're probably healthier than ever. I think the key with that, though, is that we had our opportunities, too. You know, you know, Brent and I, and none of us were totally happy with how we performed during the pandemic. Everything from merchandising to inventory control, purchasing, down to distribution operations, our bar at O'Reilly, knowing how important availability and replenishment is, is high. So, you know, we weren't totally happy with where we were, and, you know, we've made incremental improvement as well. But I think the key to remember, Zach, on, you know, when we had opportunities to pick up share, and we were able to, you know, maybe move from third call to second, or we got the opportunity through, you know, lack of supply from somebody else, and we were able to step in there with relationship, service, and back that up with availability, that that business, as you know, Zach, especially on the professional side, is incredibly sticky. You know, those relationships and that trust, it takes time to build that and to gain that business. It takes a long time to gain that business, and it would be challenging, or excuse me, it would be out of the norm to lose that business very quickly when you've really stepped in when somebody else fell down. And so, you know, I think we just gotta remember that business is very sticky, the relationships are sticky, and once that's built, it's very stable. On the pricing, no, we just you know, we don't feel that way. We're not seeing that, and we really don't see that as an issue moving forward. I mean, you know, time will tell, but as you know, Zach, you know, when we rolled out our pro pricing initiative, for example, you know, that was very rifle approach, strategically geared toward the, some of the lines that maybe some of the WDs and two-steppers were more aggressive than we were, and we purposely, you know, moved down and still stayed north of where a lot of those price, price points were. We didn't come down to, you know, really compete, you know, knowing that, you know, that they can move further down, and a lot of those folks live off volume anyway, and so we just don't see that as a, a near-term threat. Yeah, Zach, maybe to add a couple of comments to what Brad's already said on the pricing, especially from a WD perspective. You know, if you think about what we did—some of the things we did do to get stronger, you know, through some of the challenges of COVID that Brad talked about, you know, we've continued to diversify our supply chain, you know, across more multiple suppliers for various lines, especially in our proprietary brands. We've continued to see our proprietary brands grow. So we... And we continue to, you know, be pleased with what that is yielding in terms of our gross margins and how they're—we're able to continue to enhance those moving forward. Feel like we're in a much better strategic position, probably, than where we're going into COVID, that does come up out there, but we're just not seeing it at this point. Appreciate the thoughts, guys. Thanks for the time. Yep, thank you. Thanks, Zach. Your next question for today is coming from Simeon Gutman from Morgan Stanley. Hey, good morning, everyone. First question is on gross margin. It stepped back a bit from price investments, and we've come to accept that it probably won't snap back anytime soon. Anything new on that as you get leverage over some of the distribution costs? Are you reinvesting those? Is there any reason we can see gross margin click back up? Yeah. Hey, Simeon, Jeremy, you know, we continue to focus on gross profit dollar growth. So, you know, obviously, in a few months here, we'll speak to where we think 2024 might look. But, but at this stage, you know, our hope, I think from a longer-term perspective, as we think about our gross margins, really kind of comes to what we can do incrementally to improve, you know, the unit volume out of our stores, which helps us leverage DC expenses. I think, you know, that obviously, during the course of the pandemic was pressured as the supply chains got more challenging and feel like that we've got an opportunity from a more normalized standpoint to do a bit better there as we take market share. You know, certainly, I think the value that we have as a partner to our suppliers to be an excellent way for them to grow their business and to gain market share themselves is high. It continues to be, I think, kind of a favored nation status for us. And obviously, you know, that's important for us as we work to manage our costs over the course of time. And I think what we've seen during the course of some of our pauses this year have been the ability to do, you know, incrementally better on the acquisition cost perspective. But our focus has always been: how do we partner well with our supplier base and our community? How do we improve availability so that we can drive top-line sales growth and then gross profit dollars that flow from that? Thanks. And then a quick follow-up. This is to clarify some of the points, Jeremy, you made, and I think Brad made around market share. Is the story of the incredible market share of this year, is that you said more new accounts that you hadn't serviced before, or is being a primary distributor, meaning number one on the call, is that market share penetration, it keeps ticking higher? Yeah, thanks for that question, Simeon. I wouldn't want there to be any confusion there. It's a little bit hard for us to really classify a new account versus not a new account. You know, our store teams are relentless in understanding every dollar of business that's done in a market. We will, especially, you know, think about going into a new market. We're gonna canvas that market, and we're gonna take around our credit apps, and we're gonna wanna sign up everybody to be an O'Reilly customer from day one. So the concept of completely new customers is a little bit foreign. For us, it's really how do you continue to grow a larger share of that wallet? I think what we've seen, just broad-based over the strong momentum we've had, is that we've been able to grow share on both our larger accounts that were, you know, heavy purchasers of O'Reilly Parts, and then maybe we already had first call status all the way down what the call tree would have looked like. So it's pretty broad-based for us. I don't know if there's any one type of customer group that we think is outside that moves the needle versus the broader population. Okay, thanks. Good luck. Thanks, Simeon. Thanks, Simeon. Your next question for today is coming from Greg Melich with Evercore ISI. Hey, guys. Good morning, it's Mike Montani on for Greg. Thanks for taking the question. Wanted to ask, first off, if I could, about the impact of inflation in the quarter. Can you just give us a sense of the level there? And then, you know, do you see inflation just basically turning into more disinflation in the fourth quarter, or should we be thinking about, you know, the potential for outright deflation to come in? Yes, Mike, thanks for the question. You know, third quarter was kind of low single digits, and that's kind of continued to ratchet down this year, completely in line with what we expect. We don't, by any means, anticipate deflation within our business. We think our industry, over the long term, has been able to hold the price levels. You know, it's a, t here's a lot of inventory investment. It's a non-discretionary spend for certain, you know, even as some of us realize some cost improvements, we've been able to hold on to our prices, and that's what we would anticipate seeing moving forward. You know, we've really sort of, as we've exited third quarter and we think about fourth quarter, we would really say, and Brad said in his comments, a normalized inflation environment. You know, we'll have a little bit of it. It's gonna be in that low single digits, not a huge tailwind, but really more consistent with what we've historically seen within the business. With the opportunity, from an added benefit perspective, that as parts become more complex and the new applications have better technology, they're engineered better, the complexity is gonna drive the overall value of the changing dynamic of parts to cause average tickets to go up. And then it, you know, it's our challenge to continue to grow those tickets just on how we provide great service to our customers. Just from a gross margin comparison, I just wanted to ask: anything to know from an LIFO perspective, you know, as we head into the fourth quarter and or any impact from that on the third quarter? No, really, as we think about our how we report and think about our gross margin, you know, we view our reported gross margin as the best measurement of how we think about the business. Most current reflection of what we're paying for parts today, and in, don't really, I think, internally or externally view some of the changes in the nominal LIFO reserves on our balance sheet to be as relevant for us as what we think the top-line reported margin is. And you know, we continue to expect that to be stable as we've maintained our guidance really all year long on that item. Thank you. Good luck. Thanks, Mike. Thanks, Mike. Your next question is coming from Chris Horvers from JPMorgan. Good morning, guys, and thanks for taking my question and best of luck, and congratulations, Greg. My first question is trying to dial in a little bit more on the SG&A. I guess, you know, can you talk—help us think about how much of the SG&A is just naturally more variable relative to other retail models, given how you, you know, incentivize and reward your employees? Like, if, you know, if comps were up 3%-5%, and we backed out the PTO adjustment, but then you ended up doing an 8%, you know, how would you think about that normalized SG&A per store growth of 2%-2.5%? You know, what would that go to holding everything else constant? Yeah. Thanks, Chris. Appreciate the question. You know, and there are, I think, a lot of moving pieces in that, especially in a year like this year, when we've done, you know, some things that are outside of our normal cadence of spend, as it relates to the investments that we've made. You know, we still continue to operate a relatively high fixed cost model just because of the nature of having so many units and the store teams that are there. So that does benefit us as we grow sales. In a, you know, be reluctant, I think a little bit to quantify or try to parse out those individual numbers, but I think there is a positive. Certainly, in a year like this one, when we've seen such an acceleration in growth, there is just a level of activity that requires, and that's a lot of what we saw here in the third quarter. Part of that's incentive comp, but part of it is, especially on the professional side of the business, we don't want to ever be in a spot where we can't get parts out to our shops really quickly and manage that business. So, it is a little bit of a mix between the two, and I think in kind of a little bit more of a normalized sales environment, we expect that we'd be in a pretty stable place. For sure, our approach this year has been, as we have gained the momentum that we have, the opportunity to accelerate that growth by investing in the business has been a key priority for us. Understood. You know, if we went back 10-15 years ago, there was always this view that there was a view that you actually originally agreed with, with the, you know, that, like, private label parts aren't gonna work for certain type of cars, whether it's a foreign nameplate, certain mechanics didn't like private label, and, you know, there was this push to have access to OEM parts, particularly on the foreign nameplate side. Do you think the industry has changed in any way, where there is the customer is more, the mechanic's more amenable? And how has your capabilities around that changed over time? Hey, Chris, this is Brad. That's a great question, and I'll take a stab at it and then maybe flip it to Brent for any other commentary on private label. I think you're overall, I think it's accurate what you said. You know, this is my 27th year with the company. When you think back to the early 2000s and you think about the '90s, you know, just in my experience back then, there was less quality in some cases going into private label boxes back then. And, you know, we sold against that for a long, long time with a lot of success, with more of the national brands and the national companies, so to speak. But really, as really the last couple of decades have evolved, the quality that goes into our exclusive national brands is unbelievable. You know, a lot of those same parts, you know, not only meet OE quality, fit, form, and function, but they exceed. And so you think about the success we've had with Import Direct, specifically to what you're talking about with the European nameplates, along with the Asian. I mean, we couldn't have more confidence in the quality, fit, form, and function that's going into that OE box. And it is, again, not only OE, it's in a lot of cases, it's better than OE. And so I do think that dynamic has changed some over the decades, and so we have a lot of confidence in what's going into our exclusive national brand box, and we feel really good. We have a lot of opportunity to continue to get better, you know, at gaining you know, share in the specifically European shops. We have a lot of tremendous competitors out there that have been really great at that for a long time, but we feel really good about all those things. So, Brent, any other thoughts on the- Yeah private label? I think maybe just a couple other thoughts, you know, on private label, what we've seen. You know, Brad called out the success of our proprietary brand, Import Direct. But, you know, as we continue to build more quality and spec in the box, we've just continued to see more adoption and uptake for those. You know, we launched, we have our Brake Best brake line. We've got good, better, best. We've got full line designs in our proprietary brands now. We launched Brake Best Select Pro earlier this year. We're seeing tremendous both uptake on both the DIY and the professional side. Again, customers are looking for quality, and they're looking for, you know, something that's gonna meet their need at the time of need. So our... You know, we've talked a little bit about proprietary brand penetration now being over 50% of our revenue. We continue to see that number grow. We continue to see, you know, strong adoption of those proprietary brands, both with our DIY and professional customers. So we'll continue to lean into that strategy, and we'll also continue to have a national brand as a part of our line design and where we think it, you know, has relevancy in that particular category. Makes sense. Thanks very much, guys. Thanks, Chris. Thanks, Chris. We have reached our allotted time for questions. I will now turn the call back over to Mr. Greg Johnson for closing remarks. Hey, this is Brad. Thank you, Holly. We would like to conclude our call today by thanking the entire O'Reilly team for your unwavering dedication and the great results you have generated throughout 2023. I would like to thank everyone for joining our call today, and we look forward to reporting our fourth quarter and full year results in February. Thank you. Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.