NASDAQ: MNRO Updated November 2017 1
Forward Looking Information Statements contained in these materials regarding Monro s expectations with respect to future operations and other information, which can be identified by the use of forward looking terminology, such as may, will, expect, project, anticipate, estimate or continue or the negative thereof or variations thereon or comparable terminology, are forward looking statements. Several factors, including certain risks and uncertainties, could cause actual results to differ materially from results referred to in forward looking statements. There can be no assurance that Monro s expectations regarding any of these matters will be fulfilled. 2
Today s Presenters Name Title Industry Experience Selected Experience Brett Ponton President & Chief Executive Officer 20 years CEO of American Driveline Systems President & CEO of Heartland Jiffy Lube Managing Director, Asia Pacific of Veyance Technologies Vice President, Marketing of The Goodyear Tire Company Brian D Ambrosia Chief Financial Officer 5 years Regional Controller at Robbins & Myers Controller at Birds Eye Foods CFO of Rochester Sports Group Audit Manager at Deloitte & Touche 3
Company Overview Largest chain of Company-operated undercar care facilities in the United States o First muffler shop opened in Rochester in 1957 o Crossed the $1 billion sales mark for the first time in 2017 1,136 company operated stores in 27 states as of September 23, 2017 Through the April 2015 acquisition of Car-X, the Company is franchisor to 106 franchised locations in nine states and operates 38 Car-X locations Two brand strategy allows for maximum store density and market share Completed 44 acquisitions in the last 16 fiscal years, encompassing 674 stores and $900 million of revenue o Including 26 acquisitions in the past 5 fiscal years, adding 358 locations, $500 million in revenue and entry into 8 new states NASDAQ listed since 1991 under symbol MNRO 4
Geographic Footprint Expansion into Southern Markets McGee Auto Service & Tire (May 2016) - 29 stores, one retread facility in Florida, $50 million in annualized sales, breakeven in fiscal 2017 Dominant in the Northeastern U.S. and expanding in Southern and Western adjacent markets o Newer markets include Michigan, Georgia and Florida Focus on store density o o o Operate at a higher operating margin Achieve greater market share Offer greater convenience for consumers 534 service stores, 584 tire stores 5 wholesale locations operating under the Tires Now name As of March 25, 2017: 1,118 Company Owned Retail/Commercial Stores and 5 Tires Now Locations 5
Who We Are 10 well-known regional brands underneath Monro s corporate umbrella Operating two store formats in key markets o o Service stores average 80% maintenance services, 20% tires $600,000 a year in sales per store Tire stores average (excluding wholesale) 60% tires, 40% service $1.3 million a year in sales per store Service Corporate Entity Brand Portfolio Tire 6
Sales Mix FY16 Gross Margin: 40.9% FY16 Sales Mix 45% 27% 15% 10% 3% Maintenance * Brakes Exhaust Steering Tires FY17 Gross Margin: 38.9% FY17 Sales Mix 27% 13% 2% 49% 9% Maintenance * Brakes Exhaust Steering Tires Gross Margin % (Retail) Brakes and Steering = +15 Maintenance and Exhaust = baseline company margin Tires = -10 Building the tire category, a lower margin, but higher ticket category, with high value attachment opportunities Wholesale locations acquired as part of the Clark Tire acquisition in 2QFY17 operate at a lower gross margin, primarily due to a higher sales mix of tires without installation *Includes state inspections, lube, oil, filter, engine cooling service, scheduled maintenance and other. Note: Monro s fiscal year end is March of each year. 7
Competitive Advantages Operating Model Company-operated stores o Centralized purchasing and distribution o Industry leading private label program Imports 20% of parts and tires purchases o Efficient marketing CRM marketing, email, direct mail and digital Pricing power and fixed cost leverage Highly scalable operating platform Superior Value for Customers What s important to DIFM customers? Convenience 34% Products 4% Service 6% Price 10% Quality 46% Source: 2014 Lang Report Significant discount vs. dealer prices Store density provides more convenience Best price guarantee 8
Acquisition Competency Acquisition Criteria Same or contiguous markets: diversify geographic footprint, expand in Southern and Western adjacent markets, prioritize regions with favorable demographics Buy right Accretive to earnings in a reasonable timeframe FY13 FY14 FY15 FY16 FY17 Acquisition Activity 139 stores 20 stores 80 stores 35 stores and 134 franchise locations 78 stores, 4 wholesale locations and 2 retread facilities Annualized Sales growth ~$190 million ~$35 million ~$90 million ~$35 million ~$150 million 9
Industry Overview Monro operates in the $200 billion Do-It-For-Me* segment of $250 billion U.S. automotive aftermarket industry Total Bays / Mkt Share % (000 s) 2014 2008 106/9.0 119/9.9 127/10.8 125.10.5 82/7.0 73/6.1 222/18.9 199/16.7 287/24.5 340/28.5 349/29.8 338/28.3 1,173/100 1,194/100 Service Bay Population Changes (Inc/Dec in thousands): 1999 2014 OTHER TIRE STORES FOREIGN SPEC REP SPEC DEALERS SS/GAR -57-49 -32-80 -60-40 -20 0 20 40 60 11 22 42 U.S. Automotive Aftermarket Industry Do-It-For-Me: 1999-74.3% 2009-78.0% 2014-79.5% Do-It-Yourself: 1999-25.7% 2009-22.0% 2014-20.5% Dealers, service stations and garages have consolidated, while repair specialists and tire stores have gained share * Includes Replacement Tire Segment Source: 2016 Lang Annual Report 10
Age (in years) Favorable Industry Trends 260 million vehicles on the road Increasing age of vehicles (12.0 years) Average annual miles driven per vehicle up ~2% y/y* Decreasing number of service outlets and bays Increasing complexity of vehicles Favorable demographics 12.5 11.5 10.5 9.5 8.5 Average Age of Car and Light Truck on the Road 7.5 01 04 05 07 09 11 13 15 16 Source: November 2012 Lang Report, 2012 Wall Street Journal, June 2014 Lang Report and March and October 2015 and May 2016 The Lang Aftermarket ireport U.S. Annual Light Vehicle Sales Vehicles per Service Bay 18 220 16 210 200 14 190 12 180 10 170 160 8 03 05 07 08 09 10 11 12 13 14 15 16 Source: 2012 Lang Report, Zacks.com, March 2015 The Lang Aftermarket ireport, 2016 Digital AutoCare Factbook. 150 01 02 03 05 06 09 11 12 13 14 Source: October 2012 Lang Report, September 2013 Lang Report, 2014 Lang Report, 2016 Lang Annual Report. * Source: FRED Economic data, Moving 12-Month Total Vehicle Miles Traveled, July 2017 11
Aftermarket Sweet Spot Vehicles in operation projected to increase 9% during 2015 2020 Biggest benefit to 6-10 year old group, Monro s sweet spot 95 90 85 80 75 6-11 Year Old Vehicles 70 09 10 11 12 13 14 15 16 285 US Light Vehicles in Operation (VIO) 200 Vehicles Over 6 Years Old 195 270 190 255 185 180 240 175 225 2015 2016 2017E 2018E 2019E 2020E 170 09 10 11 12 13 14 15 16 17E 18E 19E Source: IHS Automotive; Analyst Reports 12
Consistent Revenue Growth ($M) 1,200.0 8.0% 1,000.0 6.0% 4.0% 800.0 2.0% 600.0 0.0% -2.0% 400.0-4.0% 200.0-6.0% -8.0% 0.0 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18E -10.0% Revenue$ SSS% Note: Monro s fiscal year end is March of each year. 13
Steady EPS Growth $2.50 14.0% $2.00 12.0% 10.0% $1.50 8.0% $1.00 6.0% 4.0% $0.50 2.0% $0.00 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18F % Change 178% 24% 17% 17% 22% 17% 12% (4%) 3% 20% 34% 35% 17% (22%) 27% 13% 6% (8%) 5-14% 0.0% EPS$ OM% *Adjusted for three-for-two stock split paid to shareholders of record as of October 21, 2003, September 21, 2007 and December 13, 2010. Note: Monro s fiscal year end is March of each year. 14
Growth Strategy Same Store Sales Growth Acquisitions Greenfield Expansion Drive higher customer retention and acquisition rates Acquire competitors at attractive prices Continue new store openings in existing markets (~ 20 to 40 stores per year) Opportunity to drive incremental traffic to our stores by providing customers with a positive and consistent customer experience, and to realize higher average ticket by optimizing our product mix Potential for 1,300 tire stores and 1,300 service stores in our 27 states o Creates market dominance and pricing power o Diversifies risk between the service platform and the tire platform o Expands pool of acquisition candidates at attractive prices o Concept unique and difficult for competitors to replicate Fiscal 2017 acquisitions expand wholesale and commercial locations and future acquisition opportunities Acquisition growth drives scale and operating margin expansion, strengthening competitive advantages 15
Areas of Strategic Focus Store Operations Simplify and standardize in-store execution Improve customer experience Optimize merchandising strategy Marketing Higher customer lifetime value Increased efficiency Higher average ticket Support direct marketing efforts with datadriven analytics Enhance customer acquisition efforts Teammate Experience New customer growth and higher customer retention and repeat visits Optimize staffing and labor scheduling Strengthen training & certification programs Clear path for advancement at Monro Technicians with cutting edge skills E-Commerce Develop online capabilities Move towards a true omni-channel Expand to new markets Leverage in-store strategic initiatives to efficiently integrate future acquisitions Acquisitions A scalable business 16
2Q Fiscal 2018 Highlights 2QFY18 2QFY17 Δ 2QFY18 Guidance Comparable Store Sales by Category Sales (millions) $278.0 $245.9 13.0% $278 $285 Same Store Sales -0.4% -4.3% 390 bps 1.0% 2.5% Operating Margin 12.2% 13.0% -80 bps - EPS $0.52 $0.53-1.9% $0.52 $0.56 Brakes: 6% Front End/Shocks: 2% Alignments: 0% Maintenance: -2% Tires: -2% Comparable store sales were flat when adjusting for lost selling days as a result of Hurricane Irma Diluted EPS of $.55 when excluding the net impact from Hurricane Irma of $.02 per share and $.01 per share in management transition costs Completed acquisitions of 20 stores, including eight from an existing Car-X franchisee o Fill-in existing markets in Michigan, Illinois and Indiana o Add $13 million in annualized sales, representing a sales mix of 95% service and 5% tires o Breakeven to earnings in fiscal 2018 17
Fiscal 2018 Outlook FY18 FY17 Δ Sales (millions) $1,115 - $1,145 $1,022 9% - 12% Same store sales (on a 52-week basis) -1.0% to +1.0% -4.3% 330 bps 530 bps EPS $1.95 - $2.10 $1.85 5% - 14% Expect flat comparable store sales in the second half of fiscal 2018 at the midpoint of the Company s full year guidance, on a 52-week basis Operating margin flat at midpoint of FY18 revenue guidance o Higher tire costs year-over-year, net of save on new oil supply contract o Expect to generate operating leverage on a comparable store sales increase above 1.0% EPS guidance includes $0.10 per share in contribution from the 53 rd week, $0.15 to $0.19 in accretion from the recently completed acquisitions, and $0.05 in management transition costs Expect to open 24 total greenfield store openings in FY18, including 7 locations in 3QFY18 18
Investment Highlights Largest chain of Company-operated undercar care facilities in the U.S. Leading market position in Northeast, Great Lakes and Mid-Atlantic with a presence in 27 states Wide breadth of product and service offerings Low cost operator with superior operating margins Solid reputation in the markets we serve Favorable industry trends Strong balance sheet and cash flow 16 years of consecutive sales increases Significant growth opportunity through greenfield expansion and acquisitions Twelve dividend increases, in twelve years, since initiated 19
Appendix 20
Historical Financials (Dollars in millions except per share data) 2 nd Quarter 2018 2 nd Quarter 2017 Fiscal Year 2017 Fiscal Year 2016 Sales $278.0 $245.9 $1,021.5 $943.7 Sales Growth (vs. prior year) 13.0% 2.8% 8.3% 5.5% EBITDA $46.0 $ 42.6 $161.6 $160.7 EBITDA Margin 16.6% 17.3% 15.8% 17.0% Operating Income $ 33.8 $ 31.9 $116.4 $120.6 Operating Income Margin 12.2% 13.0% 11.4% 12.8% Net Income $ 17.3 $ 17.5 $ 61.5 $ 66.8 Net Income Margin 6.2% 7.1% 6.0% 7.1% EPS (Diluted) $0.52 $ 0.53 $ 1.85 $ 2.00 EPS Prior Year $0.53 $ 0.57 $ 2.00 $ 1.88 21
Balance Sheet Highlights Fiscal Q/E September 23, 2017 Fiscal Y/E March 25, 2017 Current assets $ 204,075 $ 199,230 Property, plant & equipment, net 404,986 394,634 Other non-current assets 600,177 591,400 Total assets $1,209,238 $1,185,264 Current liabilities $203,329 $ 185,893 Capital leases and financing obligations Other long-term debt 222,890 153,030 213,166 182,337 Other long-term liabilities 22,314 22,614 Total liabilities 601,563 604,010 Shareholders equity 607,675 581,254 Total liabilities and shareholders equity $1,209,238 $1,185,264 Debt-to-capital (includes capital leases) 39% 41% Debt-to-capital (excludes capital leases) 20% 24% 22
Recent Acquisitions Kramer Tire (April 2012) 20 stores in Virginia 2011 sales - $25 million Colony Tire (June 2012) 18 stores in North Carolina 2011 sales - $25 million Tuffy/Car-X (August 2012) 17 stores in Wisconsin (13) and South Carolina (4) 2011 sales - $9 million Tire Barn (November 2012) 31 stores in Indiana (27), Tennessee (3) and Illinois (1) 2011 sales - $64 million Ken Towery Tire and Auto Care (December 2012) 27 stores in Kentucky (24) and Indiana (3) and Wholesale operation 2011 sales - $54 million (including Wholesale) Distribution center located in Louisville, Kentucky Enger Tire Center/Enger Auto Service (December 2012) 12 stores in Ohio 2011 sales - $9 million Purchased real estate for eight locations Tire King (December 2012) 9 stores in North Carolina 2011 sales - $11 million Purchased real estate for four locations Curry s Auto Service (August 2013) 10 stores in Virginia (9) and Maryland (1) 2012 sales - $18 million Purchased real estate for one location S & S Firestone (November 2013) 4 stores in Kentucky 2012 sales - $5 million Purchased real estate for three locations Carl King Tire (November 2013) 6 stores in Delaware (5) and Maryland (1) 2012 sales - $10 million Lentz USA/Kan Rock Tire (June 2014) 19 stores in Michigan 2013 sales - $14 million Purchased real estate for all locations The Tire Choice (August 2014) 35 stores in Florida 2013 sales - $48 million Purchased real estate for five locations 23
Recent Acquisitions (cont.) Wood & Fullerton (October 2014) 9 stores in Georgia 2013 sales - $10 million Gold Coast Tire & Auto Centers (December 2014) 9 stores in Florida 2013 sales - $9 million Martino Tire (March 2015) 8 stores in Florida 2014 sales - $12 million Car-X (April 2015) Trade name and franchise rights to 146 franchise locations in Illinois, Indiana, Kentucky, Missouri, Ohio, Tennessee, Wisconsin, Iowa, Minnesota and Texas Kost Tire and Windsor Tire (NY, PA, MA) (July/August 2015) 31 stores in central New York, Pennsylvania and Massachusetts Kost stores = 27 locations 2014 sales - $31 million McGee Auto Service & Tires (May 2016) 29 stores and one retread facility in Florida $50 million in annualized sales Breakeven in fiscal 2017 Excel Tire (July 2016) 4 stores in Minnesota 2015 sales - $3.4 million Clark Tire (September 2016) 26 stores, four wholesale locations and one retread facility in North Carolina, South Carolina and Tennessee $85 million in annualized sales Slightly dilutive in FY17 Nona (Car-X) (February 2017) 16 stores in Illinois and Iowa $15 million in annualized sales Auto MD and Speedy Auto Service (July/August 2017) 20 stores in Michigan, Illinois and Indiana $13 million in annualized sales Breakeven in FY18 24
Geographic Footprint State Service Stores Tire Stores Tires Now Connecticut 35 Delaware 2 7 Florida 86 Georgia 13 Illinois 14 5 Indiana 11 29 Iowa 3 Kentucky 33 1 Maine 18 Maryland 9 65 Massachusetts 36 9 Michigan 21 Minnesota 4 Missouri 22 New Hampshire 9 20 New Jersey 13 33 New York 118 35 North Carolina 58 2 Ohio 108 39 Pennsylvania 105 25 Rhode Island 9 2 South Carolina 1 17 1 Tennessee 3 1 Vermont 1 5 Virginia 11 60 West Virginia 7 Wisconsin 17 TOTAL 534 584 5 25
FY18 Other Assumptions Interest Expense of $23 million $48 million depreciation and amortization EBITDA approximately $178 million $38 million of cap-ex o o $30 million in maintenance cap-ex $8 million for new stores 26