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TRANSCRIPT
Monro, Inc.Investor
Presentation
November 2018
Certain statements in this presentation, other than statements of historical fact, including estimates, projections, statementsrelated to our business plans and operating results are forward-looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995. Monro has identified some of these forward-looking statements with words such as“anticipates,” “believes,” “expects,” “estimates,” “is likely,” “predicts,” “projects,” “forecasts,” “may,” “will,” “should,” and“intends” and the negative of these words or other comparable terminology. These forward-looking statements are based onMonro’s current expectations, estimates, projections and assumptions as of the date such statements are made, and aresubject to risks and uncertainties that may cause results to differ materially from those expressed or implied in the forward-looking statements. Additional information regarding these risks and uncertainties are described in the Company’s filings withthe Securities and Exchange Commission, including in the “Risk Factors” and “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” sections of our most recently filed periodic reports on Forms 10-K and Form10-Q, which are available on Monro’s website at http://www.Monro.com/Corporate/SEC-filings. Monro assumes no obligationto update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
This presentation contains references to Adjusted Earnings Per Share (EPS), which is a “non-GAAP financial measure” asthis term is defined in Item 10(e) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934and Regulation G under the Securities Exchange Act of 1934. In accordance with these rules, Monro has reconciled this non-GAAP financial measure to its most directly comparable U.S. GAAP measure. Management views this non-GAAP financialmeasure as a way to assess comparability between periods.
This non-GAAP financial measure is not intended to represent, and should not be considered more meaningful than, or as analternative to, its most directly comparable GAAP measure. This non-GAAP financial measure may be different from similarlytitled non-GAAP financial measures used by other companies.
Safe Harbor Statement and Non-GAAP Measures
2
Company Overview
3
▪ Dominant in the Northeastern U.S. and expanding
in Southern and Western adjacent markets
▪ Fiscal 2018 sales of $1,127.8 million
▪ 1,184 company operated stores in 28 states and
97 franchised locations as of October 25, 2018
▪ 29 acquisitions in the past 6 fiscal years, adding
386 locations, $520 million in revenue and entry
into 8 new states
▪ 8 wholesale locations and 3 retread facilities
A Leading Chain of Independently Owned and Operated Tire and Auto Service Locations
Store locations as of 3/31/18
A Strong Brand Portfolio
▪ 10 well-known regional brands underneath Monro’s
corporate umbrella
▪ Operating two store formats in key markets
− Service stores – 561 stores
• 80% maintenance services, 20% tires
• $600,000 a year in sales per store
− Tire stores - 623 stores (excluding wholesale)
• 60% tires, 40% service
• $1.2 million a year in sales per store
▪ 8 wholesale locations and 3 retread facilities
4
Multiple Store Brand Strategy Driving Increased Store Density
Brand Portfolio
Service Tire
A Unique Operating Model
Monro Has a Diversified Supply Chain, Sourcing High Quality, Low Cost Parts Direct and a Strong Portfolio of Tire Brands
TIRES
PARTS
Secondary parts distribution:
The following types of parts are sourced
from various cities in China:
▪ Brake Rotors and Pads
▪ Filters
▪ Steering and Suspension
▪ Wipers
▪ Belts
5Store locations as of 3/31/18
A Favorable Industry Backdrop
6
Favorable Industry Backdrop for Automotive Services with the
Vehicles in Operation Expected to Grow Significantly Over the Next Five Years
U.S. Annual Light Vehicle Sales
Total Miles Traveled in U.S.
Source: FRED Economic data, Light weight Vehicle Sales: Autos and Light Trucks, Dec 2017 Source: Lang, IHS Markit, 2018. 2018 – 2022 are estimated figures
U.S. Light Vehicles in Operation (VIO)
200
210
220
230
240
250
260
270
280
290
300
2012 2013 2014 2015 2016 2017 2018* 2019* 2020* 2021* 2022*
Source: FRED Economic data, Moving 12-Month Total Vehicle Miles Traveled
▪ Growing total vehicle population from U.S. auto sales
▪ 270+ million vehicles on the road
▪ Increasing age of vehicles (average of ~12 years)
▪ Total annual miles driven up ~1.3% y/y
▪ Decreasing number of service outlets and bays
▪ Increasing complexity of vehicles
▪ Favorable demographics
Key Highlights
8
10
12
14
16
18
03 05 07 08 09 10 11 12 13 14 15 16 17
2,700,000
2,800,000
2,900,000
3,000,000
3,100,000
3,200,000
3,300,000
03 05 07 08 09 10 11 12 13 14 15 16 17
A Favorable Industry Backdrop
Vehicles in Operation – 0 to 5 Years Vehicles in Operation – 6 to 12 Years
Monro is Well-Positioned to Capitalize on Positive Industry Trends,
with Our Sweet Spot Experiencing the Fastest Growth in Vehicles in Operation
50
60
70
80
90
100
110
120
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
+6.56% CAGR -.03% CAGR
▪ Strong growth in new vehicles (0-5 years) over the past 5
years is creating a significant tailwind for the 6-12 year old
vehicle cohort for the next five years
▪ 6-12 year cohort expected to grow the fastest at +3.9%
CAGR over the next five years
▪ Monro’s targeted market segment is the 6-12 year cohort
50
60
70
80
90
100
110
120
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
-3.97% CAGR +3.90% CAGR
Vehicles in Operation – 13+ Years
50
60
70
80
90
100
110
120
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
+4.27% CAGR +1.47% CAGR
Source for all data: Lang, IHS Markit, 2018
Key Highlights
7
A Favorable Industry Backdrop
Monro Operates in the $230 Billion Do-It-For-Me* Segment of $287 Billion U.S. Automotive Aftermarket Industry
Automotive Aftermarket DIFM vs. DIY Sales
0
50,000
100,000
150,000
200,000
250,000
300,000
2012 2013 2014 2015 2016 2017
DIFM DIY
Source: Autocare Association Factbook
2008 % (outlets) 2016 % (outlets) CAGR
Dealers 20,770 15.6% 16,680 12.7% (2.7%)
General Repair
Garages76,564 57.4% 80,071 61.1% 0.6%
Tire Dealers 18,596 14.0% 19,822 15.1% 0.8%
Specialty Repair 9,674 7.3% 7,040 5.4% (3.9%)
Oil Change/Lube 7,649 5.7% 7,437 5.7% (0.4%)
Total 133,253 100% 131,050 100%
Source: Autocare Association Factbook
▪ DIFM continues to gain share from DIY
segment
▪ Vehicle complexity continues to drive shift to
DIFM from DIY
▪ Future technology advances expected to
accelerate shift to DIFM
DIFM vs. DIY Trends
▪ Fewer outlets/bays to work on more vehicles in
operation in the U.S.
▪ Industry still highly fragmented, with significant
opportunities for further consolidation
Key Highlights
* Includes Replacement Tire Segment 8
Second Quarter Fiscal 2019 Highlights
▪ Comparable store sales increased by 3.2%
compared to a decline of 0.4% in the prior year
period
▪ Sales from new stores added $19.9M, including
sales from recent acquisitions of $15.6M
Sustained Top-Line Momentum Driven by Accelerating Comparable Store Sales
2-Year Stacked Comps Trend Improvement3 Y/Y Comps Trend Improvement
▪ Brakes: 12%
▪ Tires: 3%
▪ Front End/Shocks: Flat
▪ Maintenance: Flat
▪ Alignments: -1%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18
2QFY19
Key Highlights
2QFY19
Key Highlights
9
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18
1Results have been adjusted for the extra selling week
2Results have been adjusted for the Memorial Day holiday calendar shift
32-Year Stacked Comps represent the sum of the prior year and current year period comparable store sales performance
1 2 2
1 2 2
(Thru Oct. 25)
(Thru Oct. 25)
A Scalable Platform: Recent Acquisitions
10
Acquisitions Completed and Announced to Date in Fiscal 2019 Represent $80M in Annualized Sales
1Greenfield stores include new construction as well as the acquisition of one to four store operations
Announced Acquisitions
▪ Completed previously announced Pohlman Tire & Auto Service, Inc. acquisition in the third quarter
▪ Five retail locations in Ohio, filling in an existing market
▪ $5M in annualized revenue, breakeven to EPS in FY19
▪ Sales mix of 70% service and 30% tires
▪ Signed definitive agreement to acquire 13 retail locations in the Southeast, filling in an existing market
▪ $12M in annualized revenue, breakeven to EPS in FY19
▪ Sales mix of 65% service and 35% tires
Greenfield Openings1
▪ Added 8 greenfield locations during the second quarter
Driving Long-Term Sustainable Growth
Enhance Customer-Centric
Engagement• Customer retention
• Customer acquisition
• Omnichannel
Accelerate Productivity
& Team Engagement• Optimized store staffing model
• Clearly defined career path and
enhanced training program
• Aligned compensation
Improve Customer Experience• Online reputation management
• Consistent in-store experience
• Consistent store appearance
Scalable Platform to
Drive SustainableGrowth
11
Investments in Technology and Data-Driven Analytics to Support Strategic Initiatives
Optimize Product &
Service Offering• Redefined selling approach
• Optimized tire assortment
Improve Customer Experience
Improve SEO and local listing management
Effectively build and manage online presenceOnline Reputation
Management
Deliver a best-in-class experience to all customers
Provide clear product choices and quality service to
customers
Consistent In-Store
Experience
Modernize store layout
Establish clear standards for retail bannersConsistent Store
Appearance
12
Delivering a
Five-Star
Experience
Focus marketing spend to higher ROI channels
Launch direct marketing via new analytic-based
CRM platform
Enhance private label credit card offering
Use analytics to optimize digital efforts
Leverage market segmentation and demographic
information to facilitate direct marketing to target
customers
Upgrade website with mobile-capable architecture
Launch e-commerce capability for online tire
purchases and installations in- store
Leverage preferred tire installer agreements to
drive traffic
Enhance Customer-Centric Engagement
13
Customer Retention
Customer Acquisition
Omnichannel
Omnichannel: Expanded Amazon.com Collaboration
14
Expanded Collaboration With Amazon.com Supports Monro’s Online Tire Retailers Installation Strategy
Expanded Amazon.com Collaboration
▪ Monro’s tire installation services available to customers who purchase tires
online from Amazon.com and select the Ship-to-Store option
▪ Initially launched in the greater Baltimore area, now available at nearly 400
locations operating under a number of Monro brands in Georgia, Florida,
Illinois, Indiana, Ohio, Maryland, Michigan, New York, Tennessee and Virginia
▪ Collaboration will be expanded to provide tire installation services to
Amazon.com customers at all of Monro’s retail locations across 28 states
Increased Traffic Driven by Integration with Online Tire Retailers
▪ 50% of these customers are new to Monro1
▪ Can add newly acquired customers to CRM database, building long-term one-
to-one relationships
1Reflects historical data based on existing relationships with online tire retailers
Improve tire sales strategy to offer the right tires at
the right price
Leverage data to optimize inventory assortment
Simplify invoices and inspection forms
Clearly defined ‘Good, Better, Best’ product options
Educate customers on new tire installation, brake
and oil change service options
Optimize Product & Service Offering
15
Optimized Tire Assortment
Redefined Selling
Approach
FuturePresentPast
Accelerate Productivity & Team Engagement
Align store compensation model with performance
Incentives grow as sales, profits and customer
experience improveAligned Compensation
Achieve the right balance of labor and technical
abilities across our stores
Implement data-driven store scheduling software
Optimized Store
Staffing Model
Attract, train and retain talented technicians and
managers
Develop a comprehensive learning management
system: Monro University
Clearly Defined Career Path
and Enhanced
Training Program
16
Monro.Forward Progress Update
17
Continuing to execute customer satisfaction and online reputation management
program across Monro’s store base
Focus on the in-store experience is having significant impact on Company online
reviews and has increased “Star Ratings” to 4.7 Year-to-Date and 4.4 All-time
Improve Customer
Experience
Monro.Forward Initiatives Well Underway and Advancing as Planned
3.7
4.0
4.2
4.3 4.4
4.1
4.5
4.7 4.74.7
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
Q3 FY18 Q4 FY18 Q1 FY19 Q2 FY19 YTD FY19*
Num
ber
of
Revie
ws
Negative Neutral Positive End of Quarter All Time Star Rating FY Quarterly Rating
*Through 10/22/18
Monro.Forward Progress Update (Cont.)
18
Launched Monro playbook and store re-image initiative pilot in Rochester, NY in the
beginning of 3QFY19
Modernized store layout to be rolled out across the Company’s markets and store
formats
Improve Customer
Experience
Monro.Forward Initiatives Well Underway and Advancing as Planned
Monro.Forward Progress Update (Cont.)
19
In 2QFY19, rolled out modernized corporate and retail websites and direct marketing
through analytic-based CRM platform
Expanded collaboration with Amazon.com to over 400 stores in 3QFY19, supporting
omni-channel strategy
Enhance Customer-
Centric Engagement
Optimized store staffing model after addressing overstaffed stores in 2QFY19
Monro University training courses to be launched in 3QFY19
Data-driven store scheduling and staffing software implementation on track for
1QFY20 launch
Accelerate Productivity
& Team Engagement
Continued ramp up of Good-Better-Best product and service packages following the
successful launch in 1QFY19; corrected sub-optimal brake package pricing
Optimized tire sales and pricing strategy driving strength in tires
Optimize Product &
Service Offering
Monro.Forward Initiatives Well Underway and Advancing as Planned
Scalable Platform to Drive Sustainable Growth
▪ Continue to increase store density in our 28 states
▪ Expand geographically into attractive markets
▪ On average, acquisitions represent the opportunity for 10%
annual sales growth
▪ Acquisition growth drives scale and operating margin expansion,
strengthening competitive advantages
Same Store Sales Growth
▪ Through Monro.Forward, drive higher
customer retention and acquisition rates
Acquisitions
▪ Create value through profitable
acquisitions
Greenfield Expansion
▪ Continue new store openings in existing
markets
▪ ~20 to 40 stores per year
A Scalable Business Model with Multiple Avenues for Growth
20
A Proven M&A Strategy
Monro’s Acquisition Strategy Has Delivered Significant Growth Over the Years
Historical Acquisition Activity
Average
Acquisition
Size
FY13 FY14 FY15 FY16 FY17 FY18 FY19 to date
Number of
locations139 stores 20 stores 80 stores
35 stores and
134 franchise
locations
78 stores,
4 wholesale
locations and
2 retread
facilities
28 stores 50 stores 15 Stores
Annualized
Sales growth~$190 million ~$35 million ~$90 million ~$35 million ~$150 million $20 million $80 million ~$20 million
A Proven Track Record
▪ 45 acquisitions in the last 16 fiscal years, encompassing 681 locations and $900 million of revenue
▪ 29 acquisitions in the past 6 fiscal years, adding 386 locations and $520 million in revenue
− Entered 8 new states, expanding our presence in the Southern and Western markets
21
Higher Ticket From Improved In-Store Execution Drove Solid Top-Line Performance
Strong Second Quarter Fiscal 2019 Results
2QFY19 2QFY18 Δ 1HFY19 1HFY18 Δ
Sales (millions) $307.1 $278.0 10.5% $602.9 $556.5 8.3%
Same Store Sales 3.2% -0.4% 360 bps 2.5% 0.5% 200 bps
Gross Margin 39.1% 38.8% 30 bps 39.3% 39.7% (40 bps)
Operating Margin 11.2% 12.2% (100 bps) 11.2% 12.1% (90 bps)
GAAP EPS $.65 $.52 25.0% $1.26 $1.05 20.0%
One-time adjustments1 $.02 $.01 $.04 $.03
Adjusted EPS $.67 $.53 26.4% $1.30 $1.08 20.4%
22
Free Service Acquisition Impact
▪ Wholesale locations acquired as part of the Free Service acquisition operate at a lower gross margin, primarily due
to a higher sales mix of tires without installation
Monro.Forward Initiatives Impact
▪ Incurred $.02 per share of one-time costs related to Monro.Forward investments during the second quarter
▪ Initiatives are progressing as planned for the remainder of the year
1Diluted earnings per share included $.02 of one-time costs related to Monro.Forward in the second quarter of fiscal 2019, compared to $.01 of management transition costs in the second quarter of fiscal 2018. In the first six months of fiscal 2019, there were $.04 of one-time costs
related to Monro.Forward, compared to $.03 of management transition costs in the first six months of fiscal 2018.
Fiscal 2019 Outlook1
FY19 FY18 Δ
Sales (millions) $1,185 to $1,215 $1,128 5.1% to 7.7%
Same Store Sales
(on a 52-week basis)+1% to +3% -0.1%
110 bps to
310 bps
GAAP EPS $2.30 to $2.40 $1.92 20% to 25%
Delivering Growth Today While Investing for Tomorrow
Operating Margin
▪ Assumes operating margin of 11.1% at midpoint of FY19 sales guidance
(11.4% excluding FY19 acquisitions announced and completed to date)
▪ Expect stable tire and oil costs year-over-year
▪ Expect to generate earnings increase on a comparable store sales increase
above 1.0%
Tax Savings
▪ Estimate ~$.40 tax benefit from newly enacted tax legislation
▪ Tax rate expected to be reduced from ~37% to ~23% in FY19
Reinvestment of Tax Savings
▪ Reinvestment of ~30%, or ~$.13, to support Monro.Forward strategy
($.09 of recurring expenses and $.04 of one-time items in FY19):
– Improve Customer Experience – (~$.04)
– Enhance Customer Engagement – (~$.01)
– Accelerate Productivity & Team Engagement – (~$.08)
Additional Guidance Assumptions (at the midpoint)
▪ Interest expense of $29 million
▪ Depreciation and amortization of $55 million
▪ EBITDA of approximately $187 million
▪ 33.6 million weighted average number of diluted shares outstanding 23
Stores and Weeks
▪ Guidance includes recently announced and completed acquisitions
and excludes any additional potential acquisitions
▪ Guidance includes eight ground-up greenfield store openings in FY19
▪ FY19 represents a 52 week year compared to 53 weeks for FY18
1Guided to upper end of fiscal 2019 comparable store sales and reiterated EPS guidance on October 25, 2018
Fiscal 2019 Outlook – Capital Investment
Incremental Capital Spending Focused Primarily on Store Refresh Pilot and Early Rollout Second Half of FY19
24
Refresh Light
Refresh
Renovation Light
Renovation
Renovation Plus
Store Refresh Initiative
▪ Appropriate level of investment driven by store
age, size and market demographics
▪ 30 store pilot started in Q3 FY19
Capital Investment Area(Capital Spending by Area, $ in Million)
4.3 5.4
29.3
26.8
1.7
9.4
3.8 5.4
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FY18 Actual FY19 Estimate
IT Infrastructure
Monro.Forward Store Re-Image
Other
New Stores
$39.1 $47.0
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
FY19E FY21E
4.0% +
2.0%
10.5%
11.0%
11.5%
12.0%
12.5%
13.0%
FY19E FY21E
12.0%+
11.1%
SSS Improvement
Operating Margin
Expansion
Three-Year Organic Growth Financial Targets
Accelerating Same Store Sales Growth Drives Operating Leverage and Double Digit Earnings Growth
Accelerate from 2% to above 4%Same Store Sales Growth
Return to 12%+ Operating MarginOperating Margin
Expansion
Deliver Consistent 10% - 15% Earnings
GrowthEarnings Per Share Growth
Note: Financial targets exclude any future potential acquisitions 25
Disciplined Capital Allocation
26
Executing on Growth Strategy While Maintaining a Disciplined Approach to Capital Allocation
Investing in the Business
▪ 1HFY19 capex of $21.7M
▪ Continue to expect ~$75M of incremental CapEx over the next 5 years to invest in store re-image and technology
Returning Cash to Shareholders
▪ In 1HFY19, paid $13.4M in dividends
▪ Currently $.20 per share quarterly, an increase of 11% from 2QFY18
Executing on M&A Opportunities
▪ In 1HFY19, spent $39.1M on acquisitions
▪ Signed definitive agreements to acquire 18 stores, bringing annualized sales from fiscal 2019 acquisitions to $80M
Utilizing Strong Balance Sheet
▪ In 1HFY19, generated $76.0M of operating cash flow
▪ Debt-to-EBITDA ratio as of September 2018 of 2.2x provides significant flexibility to fund M&A strategy
Investment Highlights
27
▪ Leading chain of Company-operated undercar care facilities in the U.S. with a wide breadth of product and service offerings
▪ Strong market position in Northeast, Great Lakes and Mid-Atlantic with a presence in 28 states
▪ 17 years of consecutive annual sales growth
▪ Low cost operator with strong operating margins
▪ Well-positioned to capitalize on a favorable industry backdrop
▪ Monro.Forward strategy creating a scalable platform to drive sustainable growth, with a focus on operational excellence to
increase overall customer lifetime value
▪ Significant growth opportunity to execute disciplined acquisition strategy in a highly fragmented industry
▪ Strong balance sheet and cash flow
▪ Delivering consistent shareholder returns with thirteen dividend increases, every year since a cash dividend was initiated
28
Appendix
Q2 FY19 Q3 FY19 Q4 FY19 Q2 FY20 Q3 FY20 Q4 FY20Q4 FY18 FY20FY19 FY21
Monro.Forward Strategic Initiatives
Pilot store refresh & operationalexcellence
New store comp plansMonro University (includes career path, LMS)
Technology based in-store experience
Data-driven “new customer” marketing
Monro omnichannel & e-commerce
Store staffing & scheduling system
Improve Customer Experience
Enhance Customer-Centric Engagement
Optimize Product & Service Offering
Accelerate Productivity & Team Engagement
Foundational technology & tools
New in-store sales packages
Scheduled maintenance in-store selling
Data-driven CRM
New websites
Tire category management
29
Scale store refresh & operational excellence
= Completed Initiatives
Fiscal 2019 Outlook – EPS Bridge
Note: Guidance bridge based on midpoint of FY19 EPS guidance 30
($0.07)
($0.13)
$1.98
$0.17
$0.40$0.02
$2.35
$1.65
$1.90
$2.15
$2.40
FY18 Adjusted EPS 2% Comp SalesIncrease
Inflation Initiative Investments FY19 Tax ReformImpact
FY18 Acquisitions Other FY19E GAAP EPS
($0.02)