Monro, Inc.

please press star followed by zero on your touch-tone 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 Wechsler, Vice President 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 dot Monroe dot com forward slash investors. If I could draw your attention to the safe harbor statement on slide 2, 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 are 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, Peter Fitzsimmons.

Thank you, Felix, and thanks to everyone for joining us. Great to be here with you today. This morning, I'd like to update you on the continued progress we are making at Monroe. As we have on our prior quarterly calls, I will focus on the four key areas identified as opportunities for performance improvement, which are shown on slide three of our presentation materials. These include driving profitable customer acquisition and activation, improving our store-based customer experience and selling effectiveness, increasing merchandising productivity, which include mitigating tariff risk and continuing to work on real estate disposition related to the previous closure of 145 underperforming stores. After that, I'll briefly touch upon our fiscal second quarter results, which serve as a solid foundation to build upon as we continue to implement our performance improvement plan to enhance Monroe's operations, drive profitability, and increase adjusted operating income and total shareholder returns. Let's start with driving customer acquisition and activation. As previously discussed during our last two earnings calls, we've identified Monroe's highest value customers. As a reminder, these customers deliver significantly more profit per customer than the lowest tier of customers. They are repeat purchasers that visit us over a number of years and they choose us because we provide both the tires they want and the auto aftermarket services that meet their vehicle needs. During the second quarter, we continued to advance our acquisition marketing efforts through the deployment of a wide range of digital marketing tools to reach our target audience. We have increasingly activated our customer relationship management marketing to speak to our existing customers. Integrated into our marketing activities is the completion of a customer segmentation analysis that is helping to augment our marketing efforts with further granularity on higher value existing customers and potential customers, those who are expected to generate significantly more revenue and gross margin dollars than the average Monroe guest. We have now ramped our refined targeting to almost 600 stores. And we are encouraged to see that these stores are outperforming the balance of our store chain on several key metrics, such as call volumes, store traffic, sales, and gross profit dollar generation. And while we won't necessarily expand our marketing efforts to all stores, we do plan to ramp up and scale these efforts by the end of December. In early September, we were pleased to strengthen our marketing team with the hiring of a new leader. Tim Farrell as our Vice President of Marketing. Tim has extensive experience driving growth for multi-location businesses, including Valvoline and Sun Auto Tire and Service, with a focus on media strategy and targeting, brand positioning and messaging, digital marketing, lead generation, and conversion rate optimization. In two months, Tim has made meaningful enhancements to our marketing strategy and execution. Now let's discuss the things we are doing to improve the customer experience and selling effectiveness in the stores. During the second quarter, we further emphasized our digital courtesy inspection tool, Confidrive, to more effectively present pictures of needed vehicle maintenance and repairs to our guests during their visit to the stores. As part of improving our store operations, we've also built a periodic review process of key data coming out of Confidrive at the local level. As a reminder, we have a centralized call center that our customers call to schedule an appointment with us. This allows our store managers to focus more of their time on in-store activities without having the burden of answering each and every call that comes in. In the more than 700 stores where our Customer Call Center has already been implemented, we're encouraged to see that these stores are outperforming the balance of our store chain on key metrics, such as sales and gross profit dollar generation. We plan to expand the rollout of our Customer Call Center to all of our stores by early November. During the quarter, we also completed a field realignment to right-size and streamline our field management following the closure of the 145 underperforming stores. While this resulted in an overall reduction of district managers, it has also resulted in an overall increase in the quality of district managers across our chain. Finally, and importantly, we've also introduced a new district manager toolkit, which we believe will allow our district managers to better understand the input metrics and levers that drive store level sales, attachments, and gross margins. Now let's turn to merchandising, including mitigating tariff risk. We continue to work closely with our tire vendors to align on go-forward assortment opportunities that drive incremental sales for both parties. And we are now in the process of developing an updated tire assortment strategy that will resonate with our guests and position both Monroe and our strategic supplier partners for growth. We are encouraged by the level of vendor support we are receiving on all tire tiers, as well as with the enthusiasm of our suppliers to work with us. One area in which we have received additional support from vendors is with our fall promotions, which have helped us accelerate the sellout of tire inventory. We are also implementing new analytical tools for demand and inventory forecasting, as well as for pricing. These tools will enable us to run a more dynamic sales and operations planning process and ensure our price positioning is appropriately competitive while maximizing margins. As a complement to these tools, during the second quarter, we augmented the capabilities of our existing merchandising team with the addition of two new colleagues who are helping to lead tire acquisition and product and service pricing. We continue to carefully manage the impact of tariffs on our overall product acquisition cost and on our market pricing. We are also actively monitoring the impact of tariffs and other market conditions on actual and potential changes in tire mix as well as potential customer vehicle maintenance deferrals. Generally, we have been able to balance cost and price adjustments to enable us to maintain solid margins. And finally, just to provide an update on closed store real estate disposition. After having successfully completed the closure of 145 underperforming stores and repositioning our inventory in the first quarter, we started a process to exit the real estate at these locations, which includes 40 stores that we own. During the second quarter, we exited 21 leases and sold three owned locations. which resulted in proceeds of $5.5 million. As a reminder, this process is expected to generate positive cash flow and be largely completed during the next few quarters. Importantly, and as discussed previously, this enables us to focus on improving performance in our continuing locations for the remainder of fiscal 2026. Now let me briefly touch upon several key highlights of our fiscal second quarter results which Brian will cover in more specific detail in just a few moments. Turning to slide four of our presentation materials, the Monroe team drove comparable store sales growth again in the quarter, which has enabled us to report three consecutive quarters of positive comps for the first time in a couple of years. Further, our business generated 21 cents of adjusted diluted earnings per share which exceeded 17 cents of adjusted diluted EPS in the prior year second quarter. We achieved this through solid gross margin performance with a gross margin rate that expanded 40 basis points to 35.7% and prudent operating cost control as reflected in lower store direct costs and good corporate expense control. Further, for the second quarter in a row, we reduced inventory levels across the system, this time by approximately $11 million, which reflects improved inventory management. And while we have seen some recent softness in consumer demand, which is reflected in preliminary October comps that are down 2%, we expect to deliver positive comp store sales in fiscal 2026, And we have a variety of levers to pull that we believe will enable us to achieve meaningfully higher year over year adjusted operating income. To summarize, we continue to be pleased with the progress we've made implementing our four key areas of focus, which we believe will allow us to accelerate the pace of the company's performance improvement as well as better capitalize on positive industry trends to unlock Monroe's full potential. Our fiscal second quarter results serve as an indication of continued progress toward building enhanced profitability in fiscal 2026. Before I hand the call over to Brian, I would like again to thank our teammates for their dedication to achieving our business goals, as well as their commitment to serving our customers. 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 the remainder of fiscal 2026. Brian?