Monro, Inc.

Good morning, ladies and gentlemen, and welcome to Monroy Inc's earnings conference call for the fourth quarter and full year fiscal 2022. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. If anyone should require assistance during the call, please press star followed by the number zero on your touchtone phone. And as a reminder, this conference call is being recorded and may not be reproduced in whole or in parts without permission from the company. I would now like to introduce Felix Wexler, Senior Director of Investor Relations at Monroe. Please go ahead.

Thank you. Hello, everyone, and thank you for joining us on this morning's call. Before we get started, please note that as part of this call, we will be referencing a presentation that is available on the Investors section of our website at corporate.monroe.com. If I could draw your attention to the safe harbor statement on slide two, I'd like to remind participants that our presentation includes some forward-looking statements about Monroe's future performance. Actual results may differ materially from those suggested by our comments today. The most significant factors that could affect future results are outlined in Monroe's filings with the SEC in an earnings release and include the significant uncertainty related to the duration and scope of the COVID-19 pandemic and its impact on our customers, executive officers, and employees. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Additionally, on today's call, management statements include a discussion of certain non-GAAP financial measures, which are intended to supplement and not be substitutes for comparable GAAP measures. Reconciliations of such supplemental information to the comparable GAAP measures will be included as part of today's presentation and in our earnings release. With that, I'd like to turn the call over to Monroe's President and Chief Executive Officer, Michael Broderick.

Thank you, Felix, and good morning, everyone. I'd like to start off this morning by thanking all of our teammates and customers for their contributions to the growth and prosperity of our company, and our shareholders for their continued support. We had a tough fourth quarter, principally January, but we have begun to see the initiatives we put in place take hold and produce results. This morning, I'd like to cover four areas. Our fourth quarter results and how it played out, current trends, the impact of our initiatives and a look at our expectations for the next few months, the divestiture of our wholesale and tire distribution assets that was announced today, the rationale and how it fits into our overall strategy, and our capital allocation plans. Before we get into the details, a few words about our strategy, which many of you heard before but which bear repeating. We operate in a business with growing demand for our products and services. We are a leading player in this industry. We have developed a strategy to improve our underperforming stores, which represent about a quarter of our overall store base. The majority of our stores are growing sales and producing solid margins. We have evidence that our strategy is working. After 20% comparable store sales growth in the first nine months, The fourth quarter was severely impacted by COVID-19 surge. This impact was felt across our industry. The sales shortfall amounts to approximately $15 million versus our internal plan, or 15 to 20 cents of earnings per share. Nonetheless, our staffing strategy is working. In the fourth quarter, we added 200 technicians, which are in addition to the 450 technicians added since the first quarter of fiscal 22. This has resulted in us now having 650 more technicians than at the start of this initiative, a 15% increase. Of course, this carried a cost. Our technician labor costs increased 250 basis points, but also resulted in a substantial improvement in sales. In fiscal 2022, comparable store sales in our medium and larger stores increased about 5% compared to fiscal 2020. During the same time period, Comparable store sales in our 300 or so small and underperforming stores declined by about 8%. Understaffing was the principal reason. Let me make this point very clear. These stores received a healthy number of inquiries. Had they been able to convert these inquiries at the company average, their sales would have been quite different. They just did not have the necessary staff to provide the prompt level of service that customers require. We started implementing our new staffing initiatives in over 150 of the smaller stores. In the three fiscal months ended April 2022, their comp sales increased 8%, a 16 percentage point swing in their performance. Our staffing strategy to meet latent demand is working. We hope to have all 300 underperforming stores properly staffed by the end of calendar year 2022, subject to the tight labor market. We expect even better results as the year progresses. And all of this has been done while maintaining our material margins. As we move forward in fiscal 2023, sale trends are encouraging. While April's comparable store sales were 3% lower than our record April last year, May is trending 3% higher on a larger sales base. To summarize, in fiscal 2022, we made large investments in recruiting, training, and deploying new technicians. particularly to our medium and larger stores. These technicians are now starting to produce results as measured by higher service and tire sales and higher material margins. We are now working to improve the sales and productivity of our 300 small and underperforming stores. The demand is there and we believe we are now meeting it as the early numbers show. Now turning to the divestiture we announced today. This morning we announced an agreement to divest our wholesale and tire distribution assets to American Tire Distributors, a major player in that business. It had become very clear after an exhaustive review of our wholesale locations that we were too small to be an effective competitor. In addition, we found that we could get much better service from a large national distributor than we could provide by doing it ourselves. Our core strength as a business is to provide retail customers with superior automotive products and services. We will focus all our energies and resources on our retail operations. Our relationship with American Tire Distributors will give us a much better availability of tires, much quicker delivery, and better pricing. The transaction valued at about $105 million is expected to close in June. The proceeds from this transaction, along with the excess cash that our retail operations are expected to generate, will allow us to continue expanding our longstanding policy of sharing our results with our shareholders. The Board of Directors has approved a two cent per share increase in the cash dividend for the first quarter of fiscal 2023 to 28 cents per share. We have increased our cash dividend 17 times during the 17 years since the cash dividend was first issued. In the past five years, we have increased our quarterly cash dividend from $0.18 per share to $0.28 per share. In addition, the board has authorized the share repurchase program for the repurchase of up to $150 million of the company's common stock. Acquisitions are a major part of our strategy. We believe we have ample capacity for large, medium, or small-sized businesses which fit into our overall strategic plan. We investigate thoroughly, decide on how to integrate the new company into our team, and concurrently learn as much as possible about our new teammates. This careful approach results in a successful transaction, as shown by our recent California acquisitions, which are producing results ahead of our expectations. Above all, we strive to maintain price discipline, particularly in this era of high multiples. This pays off. In summary, there is robust demand for our products and services. In fiscal 22, we made significant investments in technician headcount productivity to expand sales and earnings. While this put pressure on our gross margin, it has positioned us to drive sustainable, comparable store sales growth in fiscal 2023. We believe we are well on our way to resolving the understaffing that has impacted our smaller stores. Along with continued contribution from our medium and larger stores, we expect to deliver comparable store sales and earnings per share growth, as well as significant cash flow generation. The divestiture of our non-core wholesale and tire distribution assets will allow for a sharper focus on our retail operations. This will allow us to return capital to our shareholders through healthy dividend and share repurchase programs, as well as capitalize on acquisitions. With that, I'll now turn the call over to Brian, who will provide an overview of Monroe's fourth quarter performance, strong financial position, and additional color regarding fiscal 2023. Brian?