November 2018 Monro, Inc. Investor Presentation
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Monro, Inc. Investor Presentation November 2018
Safe Harbor Statement and Non-GAAP Measures
Certain statements in this presentation, other than statements of historical fact, including estimates, projections, statements
related to our business plans and operating results are forward-looking statements within the meaning of the Private
Securities 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 on
Monro’s current expectations, estimates, projections and assumptions as of the date such statements are made, and are
subject 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 with
the Securities and Exchange Commission, including in the “Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” sections of our most recently filed periodic reports on Forms 10-K and Form
10-Q, which are available on Monro’s website at http://www.Monro.com/Corporate/SEC-filings. Monro assumes no obligation
to 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” as
this term is defined in Item 10(e) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934
and 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 financial
measure 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 an
alternative to, its most directly comparable GAAP measure. This non-GAAP financial measure may be different from similarly
titled non-GAAP financial measures used by other companies.
2
Company Overview
A Leading Chain of Independently Owned and Operated Tire and Auto Service Locations
▪ 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
Store locations as of 3/31/18
3
A Strong Brand Portfolio
Multiple Store Brand Strategy Driving Increased Store Density
▪ 10 well-known regional brands underneath Monro’s
corporate umbrella
Brand Portfolio
▪ Operating two store formats in key markets
− Service stores – 561 stores Service Tire
• 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
A Unique Operating Model
Monro Has a Diversified Supply Chain, Sourcing High Quality, Low Cost Parts Direct and a Strong Portfolio of Tire Brands
PARTS
The following types of parts are sourced
from various cities in China:
▪ Brake Rotors and Pads
▪ Filters
▪ Steering and Suspension
▪ Wipers
▪ Belts
Secondary parts distribution:
TIRES
Store locations as of 3/31/18 5
A Favorable Industry Backdrop
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 U.S. Light Vehicles in Operation (VIO)
18 300
290
16 280
270
14 260
250
12 240
230
10 220
210
8 200
03 05 07 08 09 10 11 12 13 14 15 16 17 2012 2013 2014 2015 2016 2017 2018* 2019* 2020* 2021* 2022*
Source: FRED Economic data, Light weight Vehicle Sales: Autos and Light Trucks, Dec 2017 Source: Lang, IHS Markit, 2018. 2018 – 2022 are estimated figures
Total Miles Traveled in U.S. Key Highlights
3,300,000
3,200,000 ▪ Growing total vehicle population from U.S. auto sales
▪ 270+ million vehicles on the road
3,100,000
▪ Increasing age of vehicles (average of ~12 years)
3,000,000
▪ Total annual miles driven up ~1.3% y/y
2,900,000 ▪ Decreasing number of service outlets and bays
2,800,000 ▪ Increasing complexity of vehicles
▪ Favorable demographics
2,700,000
03 05 07 08 09 10 11 12 13 14 15 16 17
Source: FRED Economic data, Moving 12-Month Total Vehicle Miles Traveled 6
A Favorable Industry Backdrop
Monro is Well-Positioned to Capitalize on Positive Industry Trends,
with Our Sweet Spot Experiencing the Fastest Growth in Vehicles in Operation
Vehicles in Operation – 0 to 5 Years Vehicles in Operation – 6 to 12 Years
120 120
110 +6.56% CAGR -.03% CAGR 110 -3.97% CAGR +3.90% CAGR
100 100
90 90
80 80
70 70
60 60
50 50
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Vehicles in Operation – 13+ Years Key Highlights
+4.27% CAGR +1.47% CAGR
120 ▪ Strong growth in new vehicles (0-5 years) over the past 5
110 years is creating a significant tailwind for the 6-12 year old
100 vehicle cohort for the next five years
90
▪ 6-12 year cohort expected to grow the fastest at +3.9%
80
CAGR over the next five years
70
60 ▪ Monro’s targeted market segment is the 6-12 year cohort
50
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source for all data: Lang, IHS Markit, 2018 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
2008 % (outlets) 2016 % (outlets) CAGR
300,000
250,000 Dealers 20,770 15.6% 16,680 12.7% (2.7%)
200,000 General Repair
76,564 57.4% 80,071 61.1% 0.6%
Garages
150,000
Tire Dealers 18,596 14.0% 19,822 15.1% 0.8%
100,000
Specialty Repair 9,674 7.3% 7,040 5.4% (3.9%)
50,000
Oil Change/Lube 7,649 5.7% 7,437 5.7% (0.4%)
0
2012 2013 2014 2015 2016 2017 Total 133,253 100% 131,050 100%
DIFM DIY
Source: Autocare Association Factbook Source: Autocare Association Factbook
DIFM vs. DIY Trends Key Highlights
▪ DIFM continues to gain share from DIY ▪ Fewer outlets/bays to work on more vehicles in
segment operation in the U.S.
▪ Vehicle complexity continues to drive shift to
DIFM from DIY ▪ Industry still highly fragmented, with significant
opportunities for further consolidation
▪ Future technology advances expected to
accelerate shift to DIFM
* Includes Replacement Tire Segment 8
Second Quarter Fiscal 2019 Highlights
Sustained Top-Line Momentum Driven by Accelerating Comparable Store Sales
Y/Y Comps Trend Improvement 2-Year Stacked Comps Trend Improvement3
8.0%
7.0%
6.0%
6.0%
4.0%
5.0%
2.0%
4.0%
0.0%
3.0% Jan-18 Feb-18
1
Mar-18 Apr-18 May-18 2 Jun-18 2 Jul-18 Aug-18 Sep-18 Oct-18
-2.0%
2.0% (Thru Oct. 25)
-4.0%
1.0%
0.0% -6.0%
1 2 2
-1.0% Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 -8.0%
(Thru Oct. 25) -10.0%
-2.0%
-3.0% -12.0%
2QFY19 2QFY19
Key Highlights Key Highlights
▪ Brakes: 12%
▪ Comparable store sales increased by 3.2%
compared to a decline of 0.4% in the prior year ▪ Tires: 3%
period ▪ Front End/Shocks: Flat
▪ Sales from new stores added $19.9M, including ▪ Maintenance: Flat
sales from recent acquisitions of $15.6M
▪ Alignments: -1%
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
9
A Scalable Platform: Recent Acquisitions
Acquisitions Completed and Announced to Date in Fiscal 2019 Represent $80M in Annualized Sales
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
1Greenfield stores include new construction as well as the acquisition of one to four store operations 10Driving Long-Term Sustainable Growth
Improve Customer Experience Optimize Product &
• Online reputation management Service Offering
• Consistent in-store experience • Redefined selling approach
• Consistent store appearance • Optimized tire assortment
Scalable Platform to
Enhance Customer-Centric Drive Sustainable Accelerate Productivity
Growth & Team Engagement
Engagement
• Customer retention • Optimized store staffing model
• Customer acquisition • Clearly defined career path and
• Omnichannel enhanced training program
• Aligned compensation
Investments in Technology and Data-Driven Analytics to Support Strategic Initiatives
11Improve Customer Experience
Online Reputation Improve SEO and local listing management
Management Effectively build and manage online presence
Deliver a best-in-class experience to all customers
Consistent In-Store Provide clear product choices and quality service to Delivering a
Experience customers Five-Star
Experience
Consistent Store Modernize store layout
Appearance Establish clear standards for retail banners
12Enhance Customer-Centric Engagement
Focus marketing spend to higher ROI channels
Launch direct marketing via new analytic-based
Customer Retention CRM platform
Enhance private label credit card offering
Use analytics to optimize digital efforts
Leverage market segmentation and demographic
Customer Acquisition information to facilitate direct marketing to target
customers
Upgrade website with mobile-capable architecture
Launch e-commerce capability for online tire
Omnichannel purchases and installations in- store
Leverage preferred tire installer agreements to
drive traffic
13Omnichannel: Expanded Amazon.com Collaboration
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 14Optimize Product & Service Offering
Past Present Future
Simplify invoices and inspection forms
Redefined Selling Clearly defined ‘Good, Better, Best’ product options
Approach Educate customers on new tire installation, brake
and oil change service options
Improve tire sales strategy to offer the right tires at
Optimized Tire Assortment the right price
Leverage data to optimize inventory assortment
15Accelerate Productivity & Team Engagement
Achieve the right balance of labor and technical
Optimized Store abilities across our stores
Staffing Model Implement data-driven store scheduling software
Attract, train and retain talented technicians and
Clearly Defined Career Path managers
and Enhanced Develop a comprehensive learning management
Training Program system: Monro University
Align store compensation model with performance
Aligned Compensation Incentives grow as sales, profits and customer
experience improve
16Monro.Forward Progress Update
Monro.Forward Initiatives Well Underway and Advancing as Planned
Continuing to execute customer satisfaction and online reputation management
Improve Customer program across Monro’s store base
Experience 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
90,000
4.7 4.7
4.7
80,000 4.5
70,000 4.3 4.4
4.2
Number of Reviews
60,000 4.1
4.0
50,000
40,000 3.7
30,000
20,000
10,000
-
Q3 FY18 Q4 FY18 Q1 FY19 Q2 FY19 YTD FY19*
Negative Neutral Positive End of Quarter All Time Star Rating FY Quarterly Rating
*Through 10/22/18 17Monro.Forward Progress Update (Cont.)
Monro.Forward Initiatives Well Underway and Advancing as Planned
Launched Monro playbook and store re-image initiative pilot in Rochester, NY in the
Improve Customer beginning of 3QFY19
Experience Modernized store layout to be rolled out across the Company’s markets and store
formats
18Monro.Forward Progress Update (Cont.)
Monro.Forward Initiatives Well Underway and Advancing as Planned
In 2QFY19, rolled out modernized corporate and retail websites and direct marketing
Enhance Customer- through analytic-based CRM platform
Centric Engagement Expanded collaboration with Amazon.com to over 400 stores in 3QFY19, supporting
omni-channel strategy
Continued ramp up of Good-Better-Best product and service packages following the
Optimize Product & successful launch in 1QFY19; corrected sub-optimal brake package pricing
Service Offering Optimized tire sales and pricing strategy driving strength in tires
Optimized store staffing model after addressing overstaffed stores in 2QFY19
Accelerate Productivity Monro University training courses to be launched in 3QFY19
& Team Engagement Data-driven store scheduling and staffing software implementation on track for
1QFY20 launch
19Scalable Platform to Drive Sustainable Growth
A Scalable Business Model with Multiple Avenues for Growth
Same Store Sales Growth
▪ Through Monro.Forward, drive higher
customer retention and acquisition rates
Acquisitions
▪ Create value through profitable ▪ Continue to increase store density in our 28 states
acquisitions ▪ Expand geographically into attractive markets
▪ On average, acquisitions represent the opportunity for 10%
annual sales growth
Greenfield Expansion
▪ Acquisition growth drives scale and operating margin expansion,
▪ Continue new store openings in existing
strengthening competitive advantages
markets
▪ ~20 to 40 stores per year
20A Proven M&A Strategy
Monro’s Acquisition Strategy Has Delivered Significant Growth Over the Years
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
Average
Historical Acquisition Activity Acquisition
Size
FY13 FY14 FY15 FY16 FY17 FY18 FY19 to date
78 stores,
35 stores and 4 wholesale
Number of
139 stores 20 stores 80 stores 134 franchise locations and 28 stores 50 stores 15 Stores
locations
locations 2 retread
facilities
Annualized
~$190 million ~$35 million ~$90 million ~$35 million ~$150 million $20 million $80 million ~$20 million
Sales growth
21Strong Second Quarter Fiscal 2019 Results
Higher Ticket From Improved In-Store Execution Drove Solid Top-Line Performance
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%
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.
22Fiscal 2019 Outlook1
Delivering Growth Today While Investing for Tomorrow
Operating Margin
▪ Assumes operating margin of 11.1% at midpoint of FY19 sales guidance
FY19 FY18 Δ (11.4% excluding FY19 acquisitions announced and completed to date)
▪ Expect stable tire and oil costs year-over-year
Sales (millions) $1,185 to $1,215 $1,128 5.1% to 7.7% ▪ Expect to generate earnings increase on a comparable store sales increase
above 1.0%
Same Store Sales 110 bps to Tax Savings
+1% to +3% -0.1%
(on a 52-week basis) 310 bps
▪ Estimate ~$.40 tax benefit from newly enacted tax legislation
▪ Tax rate expected to be reduced from ~37% to ~23% in FY19
GAAP EPS $2.30 to $2.40 $1.92 20% to 25%
Reinvestment of Tax Savings
▪ Reinvestment of ~30%, or ~$.13, to support Monro.Forward strategy
Stores and Weeks ($.09 of recurring expenses and $.04 of one-time items in FY19):
▪ Guidance includes recently announced and completed acquisitions – Improve Customer Experience – (~$.04)
and excludes any additional potential acquisitions – Enhance Customer Engagement – (~$.01)
▪ Guidance includes eight ground-up greenfield store openings in FY19 – Accelerate Productivity & Team Engagement – (~$.08)
▪ FY19 represents a 52 week year compared to 53 weeks for FY18 Additional Guidance Assumptions (at the midpoint)
▪ Interest expense of $29 million
▪ Depreciation and amortization of $55 million
▪ EBITDA of approximately $187 million
1Guided to upper end of fiscal 2019 comparable store sales and reiterated EPS guidance on October 25, 2018 ▪ 33.6 million weighted average number of diluted shares outstanding 23Fiscal 2019 Outlook – Capital Investment
Incremental Capital Spending Focused Primarily on Store Refresh Pilot and Early Rollout Second Half of FY19
Capital Investment Area
Store Refresh Initiative
(Capital Spending by Area, $ in Million)
Renovation Plus Refresh Light
$39.1 $47.0
100%
3.8 5.4
90% IT Infrastructure
1.7
80% 9.4 Monro.Forward Store Re-
Image Refresh
70%
Other
60%
50%
New Stores
29.3 Renovation
40% 26.8
Renovation Light
30%
20%
10% ▪ Appropriate level of investment driven by store
4.3 5.4
0% age, size and market demographics
FY18 Actual FY19 Estimate
▪ 30 store pilot started in Q3 FY19
24Three-Year Organic Growth Financial Targets
Accelerating Same Store Sales Growth Drives Operating Leverage and Double Digit Earnings Growth
5.0% SSS Improvement
4.0% +
4.0%
Same Store Sales Growth Accelerate from 2% to above 4%
3.0%
2.0%
2.0%
1.0%
Operating Margin Return to 12%+ Operating Margin 0.0%
Expansion FY19E FY21E
13.0% Operating Margin
Expansion
12.5%
Deliver Consistent 10% - 15% Earnings 12.0%+
Earnings Per Share Growth Growth 12.0%
11.5%
11.1%
11.0%
10.5%
FY19E FY21E
Note: Financial targets exclude any future potential acquisitions 25Disciplined Capital Allocation
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
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
Returning Cash to Shareholders
▪ In 1HFY19, paid $13.4M in dividends
▪ Currently $.20 per share quarterly, an increase of 11% from 2QFY18
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
26Investment Highlights
▪ 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
27Appendix
28Monro.Forward Strategic Initiatives
Q4 FY18 FY19 Q2 FY19 Q3 FY19 Q4 FY19 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY21
Foundational technology & tools
Scale store refresh & operational
Pilot store excellence
Improve Customer refresh &
operational Technology based in-store experience
Experience excellence Scheduled maintenance
in-store selling
Data-driven CRM Data-driven “new customer”
marketing
Enhance Customer-
Centric Engagement New websites Monro omnichannel & e-commerce
Optimize Product & New in-store sales
packages Tire category management
Service Offering
Monro University (includes
Accelerate New store comp plans Store staffing & scheduling system
career path, LMS)
Productivity
& Team Engagement
= Completed Initiatives
29Fiscal 2019 Outlook – EPS Bridge
$2.40
$0.02 ($0.02)
$0.40
$0.17 ($0.07)
$2.15
($0.13)
$2.35
$1.90
$1.98
$1.65
FY18 Adjusted EPS 2% Comp Sales Inflation Initiative Investments FY19 Tax Reform FY18 Acquisitions Other FY19E GAAP EPS
Increase Impact
Note: Guidance bridge based on midpoint of FY19 EPS guidance 30You can also read
