Monro, Inc.

Good morning, ladies and gentlemen, and welcome to Monroe Inc's earnings conference call for the second quarter of fiscal 2025. 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 start zero on your touchtone phone. And as a reminder, this conference call is being recorded and may not be reproduced in whole or in part without permission from the company. I would now like to introduce Felix Vexler, 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 investor section of our website at corporate.monroe.com forward slash investors. 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 and in our earnings release. 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. This morning, I'd like to share an update with you on our second quarter accomplishments. After that, I'll outline several objectives that we plan to achieve in the third quarter. Before I begin, I'd like to recognize and thank all of our teammates for their commitment to Monroe and our customers. Turning to slide three, starting with our accomplishments in the second quarter. We drove a sequential improvement in our year over year comp store sales percentage change from the first quarter, as well as a significant acceleration in our comp trends as the second quarter progressed. This gives us further confidence that our initiatives are taking hold. We like the progress, but we are just getting started. Importantly, Our tire dollar and unit sales improved sequentially from the first quarter, and our tire category exited the quarter with year-over-year growth in units in the month of September. We continued to leverage the strength of our manufacturer-funded promotions, which allowed us to meet the needs of our value-oriented consumer. And although we continued to have more work to do to improve the performance of our higher margin service categories, as shown on slide 4, Our Confidrive digital courtesy inspection process and our oil change offer allowed us to drive sequential improvement from the first quarter in our service category sales as well as year-over-year growth in both battery units and sales dollars in the quarter. Additionally, we improved our attachment rate for alignments, which resulted in year-over-year growth in both alignment units and sales dollars in the month of September. Consistent with general industry trade down dynamics, our gross margin in the second quarter was impacted by a value oriented consumer that traded down more of their tire purchases to our tier three offerings. And while this tire mix pressured material margins in the quarter, we continue to drive labor optimization and efficiencies through productivity improvements, including scheduling, training, and our attachment selling initiatives. Now onto our objectives for the third quarter. Encouragingly, our sales momentum from the second quarter has continued into fiscal October with our preliminary comp store sales down only 1%, supported by improving trends in tires and all service categories, including brakes. Excluding the impact of hurricanes Helene and Milton, our preliminary comp store sales would have been approximately flat compared to the prior year. We expect to leverage this momentum to achieve our third quarter objectives, which include improving store traffic trends driven by a keen focus on oil change services as well as continued growth in tire units, accelerating the performance of our key service categories, utilizing the benefits from Comfidrive, and optimizing labor and efficiencies through continued improvements in productivity and maintaining prudent cost control. In summary, our initiatives are driving an improvement in our top line results. Our comp store sales trends improve sequentially from the first quarter and accelerated as the second quarter progressed. This was led by our tire category, which exited the quarter with year over year unit growth in September. While we have more work to do to improve the performance of our higher margin service categories, we drove a sequential improvement in service category sales from the first quarter, year over year growth in batteries in the quarter, and year over year growth in alignments in the month of September. This serves as evidence that our initiatives are working. And although our gross margin took a step back in the quarter, we are confident that we remain on a path to restore our gross margins back to pre-COVID levels with double digit operating margins over the longer term as we return to top line growth. Our sales momentum in October, as well as continued traction from our initiatives, will enable us to achieve our third quarter objectives. And with that, I'll now turn it over to Brian, who will provide an overview of Monroe's second quarter performance, strong financial position, and additional color regarding fiscal 2025.