Thank you, everybody. I'm Michael Lasser, the Hardline Broadline and Food Retail Analyst from UBS. Welcome to the afternoon session of our UBS Consumer and Retail Conference. I don't think we could find a better way to kick off our afternoon sessions than with the team from Monroe. To my immediate left is a fixture of the UBS Consumer and Retail Conference, Brian D'Ambrosia, who is Monroe's Chief Financial Officer, and to his left is Felix Vesker, who is the Vice President of Investor Relations. I am very grateful to both gentlemen because I think this might be seven or eight years where Brian's been very graciously attending our conference. So we've had wonderful updates, conversations, and stories throughout that time, which is where I want to start because, Brian, you have been a very stable force in the Monroe organization against the backdrop of what's been a lot of change. You've seen three CEOs over the last several years, some different strategic initiatives that have been put in place, some changes to the footprint today. There's around 1,100 locations. Can you give us a little bit of the retrospective, a little bit of what has happened and where does Monroe stand today as a place for us to frame our conversation?

Absolutely. First, Michael, thank you for having us. I've enjoyed all six or seven years, as you mentioned, and looking forward to our conversation today. I've been with Monroe since 2013. I've been in the CFO role for about eight, nine years now. And I would characterize Monroe's history as one of really unit growth. And so that kind of frames a lot of the conversation about what we're working on now and what we've been working on. But that unit growth was one where the company started from a small, local, regional business centered in upstate New York to one that grew through significant acquisitions and bolt-ons to become, at its peak, about 1,300 locations. Originally, really only focused on service and limited services. Now, a broad range of automotive repair and replacement services, and inclusive of 50% of the business being tires and tire services, which all happened through that acquisition and M&A process. So with that, I think, creates the growth, the scale, and the relevance to the consumer that comes with a national footprint. but also I think what it comes with is some of the growing pains and some of the integration or even misintegration opportunities that you have to truly build a 1300 location platform. So a lot of the work that's happened over the last handful of years has been really putting in place the tools and processes to operate as a platform, not only in our merchandising in terms of how we go to market, how we buy, our supplier relationships, where our specific brands are positioned and how we think about our different brands and their role in the geographies we participate in, but also in-store, how we really leverage the capabilities we have across the chain to deliver a good experience in all of our locations through a standardized, repeatable process using standard tools and ways of going to market and doing business. So that's where a lot of the work has been, is standing those tools up. And there was a lot of foundation building, I would say, over the last five years, getting our stores wired and ready for the technologies we wanted to implement, standardizing across things as simple as phone systems, as complex as digital courtesy inspection tablets, moving from paper-based to electronic scheduling, just things that are blocking and tackling for a large operator. With a lot of that foundation building behind us, where we're at today is really implementing the tools, processes, and guest experience we want that sits on top of that. And it's leveraging a lot of those tools that we've already put in place, but it's also bringing new tools to market and to bear to enhance that. And that's a lot about what we'll talk about today is the focus that we've had over the last couple of years on our internal operations, having brought the platform to something that can be now the foundation for the next round of unit growth at Monroe.

Got you. Very helpful. That is a great starting point for our conversation. And before we get into some of the strategies that are at the heart of what Monroe is trying to achieve, I want to talk a little bit about the industry. It's been a fascinating industry. It has been a bastion of fragmentation for a long period of time. Monroe was very at the forefront. It was a pioneer in creating some of the consolidation across the auto services sector. Where does that consolidation stand today? It's still reasonably fragmented. There's a few larger players, but how do you see that playing out?

Yeah, it's a great question. I think that what we identified during our roll-up opportunity has become more widely known. And certainly, starting with the industry, the auto aftermarket is a place that has really strong, durable, long-term trends at its back. The first is the aging car park. We know the cars are getting older. I think it was 10 plus years was when I first started, maybe even nine, and now we're over 12, 13 years old for the average age of vehicle on the road. We know that those vehicles are being driven. While we had a step back during COVID in terms of vehicle miles traveled during shutdown, we're back to higher than pre-COVID levels in terms of vehicle miles traveled. And the complexity of those vehicles, we know, continues to increase, making the do-it-for-me section of the aftermarket a faster grower than the DIY, which is obviously where Monroe plays. So on top of all those really good long-term trends and the fact that most of the categories are non-discretionary, your car needs them, whether you want them or not, it makes it attractive in a very investable space in nearly all economic environments. And that, on top of the significant fragmentation, really lends itself to the M&A activity that I would say, like you said, Monroe pioneered and then ultimately has been really expanded upon by other strategic and financial buyers. And there's 120,000 service locations in the U.S. I would say that if you looked at the number of locations that the top 10 have, it's probably only about 15 percent but there's a significant tail uh in terms of an undone consolidation or remaining consolidation to happen so i think it remains an investable space um if you look at the overall market you know you you're you know the there is significant competition in addition to those 120 000 locations which includes not only mom and pops but the national chains but we also obviously have compete with club stores and mass merchandisers um you've got dealership locations on top of that as well and then of course you have online sellers of tires like like um like you you know amazon and other other online tire rack other online tire sellers so it's a pretty diverse market we compete in um in a very uh uh fragmented as it relates to the

physical location got you very helpful and you know the the recent topic that folks have been very in tune with is just the geopolitical conflict and what the rise in the price of oil might mean for consumer behavior what have you seen in the past how are you thinking about this could this is there a a level where gasoline gets to that it starts to create demand destruction was what's been what's been the case of how you looked at that yeah traditionally we

We only have history to go on, and every economic cycle is different. But traditionally, we would have to see up towards $5 oil, gas, a gallon of gas, for us to see any of that significant demand destruction. I think currently, you know, we're a ways away from that. But obviously, those are the levels that we would see a change in consumer behavior.

Yeah. And what has been your observation around the state of the consumer? There's been a lot of talk about these bifurcated trends. Monroe's seen it a little bit in terms of, you know, it's tire business where some of the more opening price point tires have done a little bit better. And maybe that's more a price sensitive consumer. So how would you describe the overall state of the consumer?

Yeah, I would say that the K-shaped economy or recovery is what we see across our consumer base, our customer base. To your point, we have a wide, I would say, demographic of customers that we serve. We serve the low-end consumer who's looking for true value and price point in terms of Tier 4 tires, and we serve a middle to higher-end consumer who might just be moving away from the dealer and coming into the aftermarket. And we see different behaviors. We see still the need to invest in their vehicles because, again, it is a needs-based purchase. But we do see the lower-end consumer continuing to push down towards the lowest possible ticket that they can have on each visit. And we see that middle-to-higher-income consumer continuing to invest in bundle services with the reason that they came in upon recommendations that we find. So I think that because of that, and we've done, and we'll probably get into it as we talk here, we've done some segmentation work. There's different ways that we talk to those consumers now. There's different ways that we're thinking about our marketing efforts in terms of attracting certain segments of that. And it certainly is affecting the way we're thinking about our lower-tier offerings in order to provide maximum value but also preserve and protect growth and margins.

Monroe's on a little bit of a difference. fiscal year, have yet to provide an outlook for the year, and I'm not asking you to do it, so Felix, don't give me those licks, but it has been a very, I think the technical term, funky winter, I'm sure you have experienced that in Rochester, this is, you know, it's a very treacherous pothole season, which is going to have a strong influence over some the spring maintenance is done, especially as those vehicles ride over, and that has an influence on the underbelly of the car, the trucks, the shocks. How are you thinking about all of this, and then on top of that, some inflation that's being passed through as a result of all the factors that have long been talked about?

It certainly is a dynamic environment. I think that what we saw, at least if we look back, what we've seen is the trading down, like you said, we talked about earlier, of the consumer to opening price point tires from tier one down to two, two to three, three to four. And we've seen that not as a new phenomenon, but just a continuation. I think this was something that we may have even talked about last year or perhaps the year before even, that post-COVID and post-inflationary, I would call it, shock of the stimulus post-COVID. You know, as prices stepped up, consumers definitely balked at some of those increases from the branded manufacturers and started to trade down into maybe brands that they were less familiar with or even non-branded tires. And that dynamic has continued. You see a continued kind of pile up in the Tier 3 and 4 levels of consumers, and it's come at the expense of some of the Tier 1 and 2 volume. That persists, and that kind of stays in the background, and we've got strategies in place to make sure that we're sorted for that new dynamic, make sure that we have opening price point tires in our FY27 that allow us to make better margins than we did in FY26. That's a lot of effort by Katie Chang and our merchandising team. We also have consolidated a lot of our volume and continue to behind fewer strategic brands and expect to be able to execute in the stores to sell more of our tires out of those brands, which keeps more tires in our assortment being sold, which provides better value for our guests, but also helps us to achieve volume rebates and better pricing. So that's one way that we've combated that kind of prolonged trade-down that doesn't really show many signs of reversing. If anything, a little bit of a barbell is occurring where the Tier 1, for the high-end consumer, the Tier 4, they're piling up and maybe leaving Tier 2 and 3. As it relates to other economic pressures, we expect and plan for a continued current environment. We know that the consumer may get a little healthier here over the next couple months as tax refunds start to hit their bank accounts. We've positioned our marketing efforts, our merchandising efforts around capitalizing on that hopefully disposable income that they have to be able to reinvest back in their vehicle. And then as it relates to the weather dynamics, on top of all that You know, we benefited from an on-time winter this year. November was a good amount of snow in the Northeast. That got our tire selling season off to a good start, as we reported in our last earnings call. But, you know, since then, the industry, and we talked about it in our January call, and I think Goodyear talked about it on their call, and it just shows up in the syndicated data, it remains soft, and tire units were soft in January, and some have an outlook for a continued soft quarter for this quarter ending of March. But you can't control all of that. What you can control for is the things that we're working on to take share, win share, and sell more tire units in any environment. Two last questions in this regard.

Number one is are you seeing deferred maintenance in other areas of your business, you know, classic behavior where debt replacing? two struts, instead of replacing four struts or shocks, someone might replace two or other indications that that prolonged deferral cycle is continuing?

Yeah, I would say that the most pronounced trade-down in deferral is occurring in tires, and I think mostly it's the most economically sensitive because of the higher price point. It's the highest ticket that we have on our service menu. But at the same time, as you move down into lower tier tires, we see lower attachments to those consumers. So a more economically sensitive consumer is going to buy lower tier tires, and they're also less likely to attach an alignment to that tire or to buy road hazard or to potentially get those other services you mentioned done. But we do have still a lot of our consumers that we would kind of consider in that bundler where they're going to come in and they're going to listen to the recommendations that you give them and they have the financial wherewithal and the commitment to that vehicle knowing that perhaps the ultimate thing they can't do is afford a new vehicle. So the trade down into maintaining their current vehicle is one that they can afford and they'll invest in. Those are the consumers through our marketing efforts that we are really targeted on bringing more of into our store. And we've done a lot of things tactically and technically to put more of our advertising and more of our marketing in front of their eyeballs.

Last one on the bigger one. One is, given all this disruption that's happening in the Middle East, could you envision any supply chain disruptions that could interfere with your ability to service your customers?

You know, we have not seen anything in our planning that would cause that. I think there is a good amount of supply onshore as we speak and still other parts, manufacturing that isn't necessarily dependent on some of those areas that are under the most pressure.

And then on tariffs and pricing, obviously, there's a lot of noise and change, and it's quite a dynamic environment. How do you think about the rollback of IEPA tariffs, sectoral tariffs that could come in place that will impact the categories that you service, and then the various dynamics on pricing?

Yeah, it's not easy.

Yeah, to say the least.

It's, you know, because, you know, we as a buyer through distribution and from manufacturer, you know, we don't have, and when we went through this when we were looking at the first round of tariffs, we don't have perfect visibility in a country of origin, right? So we really, as a strong vendor partner, we are able to work with our suppliers to get to that level of detail, but it's not initial visibility that we have. So, when we work through that and we've done a lot of cost segregation in terms of, okay, what are the costs subject to tariff that are in our costs and not, I think we're able to have robust conversations with our vendors on the appropriate level of pass-through that we should bear relative to the manufacturer or distributor as you look at the overall value chain to the consumer. That being said, with the rollback of IEPA, first of all, that doesn't change the 132 auto tariff. So that remains in full effect.

Which is an important point.

An important point, because that's where it was affecting a lot of our costs was related to that. We had, on the tire side, very little product coming out of China, which I think is the biggest beneficiary of the IEPA reduction. But at the same time, certainly some of the hard parts are still being sourced from China from distribution and manufacturing. So any relief that they experience certainly needs to make its way through the inventory costs because there are weeks of supply on hand already at those higher levels, and I don't think anyone's counting on the rebates yet given the complexity of how it seems like to even be able to apply for those. And the systems needed to be stood up before that could even begin. And so we're beginning the conversations just like we did when tariffs were announced. We began the conversations with our vendors, getting aligned on what the data is saying and what their strategy is around it, and certainly expect that we'll be part of those conversations with all of our strategic partners. And cost relief that benefits them will benefit us.

Two last ones. How do tires, are they impacted by non-AIPA tariffs at this point, such that if there's already sectoral tariffs in place for a lot of the goods that you're installing on cars, the great news is you have a little bit more certainty because there'll probably be some other categories that are now the subject to this.

so how do you yeah I think that you know if we don't see you know our initial past particularly in the tire category it doesn't show that we'll see a significant amount like I said of change related to this because we weren't sourcing a significant amount of tires from IEPA jurisdiction that being said if the there's a change in the global tariff regime to help offset the loss of those that that tariff revenue we'll have to see how that impacts the jurisdictions that we are buying from right we buy tires from Southeast Asia that don't have the IEPA tariffs surcharge I'll call it on top of the of the auto surcharge currently but that doesn't mean that the section 132 tariffs or other tariffs may not be put in place against those Southeast Asian areas to to make up for the loss of the Chinese got you there okay and are you

expecting pricing in a level of increase across the assortment that you're installing to moderate a bit yeah we have not so so one of the things that I

think is important to to understand is we've seen an increase in minimum advertised pricing from the branded manufacturers in response to the cost increases have been passed along so these are mandatory price increases that the manufacturers do to help protect the installer but that's some of that map increases what is also stimulated the trade down you have behavior by the consumer so I think that any relief from the minimum advertised price will be helpful in damming and reversing some of the trade down activities got you very

helpful so pivoting over to some of the actions Monroe has taken to improve the performance of the business there was some tough decisions that have been made closing some locations probably the right right decision even as they were difficult what what is the portfolio look like now which locations were closed and how healthy is the rest are the rest of the location yeah it's a

great question we announced in our earnings call in May the closure of of stores in in june uh which we did so in our q1 all stores were closed 145 locations the way we identified those locations was we really looked at first of all performance obviously but went beyond that to look at the drivers of that performance and really looked at areas where the market had either moved away from the business or the demographics had changed within within the the areas that those stores were located there were also some locations where when we purchased them, maybe that was the only store we owned, but we did a couple of bolt-on acquisitions afterwards and all of a sudden the landscape got a little bit crowded with those additional acquisitions that we purchased. So we looked at all of that and made the decision based on store density, based on demographic data, and also any renewal terms that we had coming up that might have been onerous on these locations for lease locations, and made a decision that these were the 145 stores that really we felt wouldn't make the journey from a financial profile that we needed them to be at. So we moved swiftly and closed those within a couple months and moved very quickly then, got the inventory transferred, transferred the sales to other locations to the extent that we had that ability, and then moved quickly to monetization of the assets. And we've since, of the 145 stores, about 82 of the stores are now fully off of our books and divested, that's resulted in over $20 million of divestiture proceeds, which has allowed us to, you know, continue to invest in things like marketing and fund all of our capital allocation priorities as well. So the importance of that is it's in our rearview mirror. We're focused on growth. We believe that we've got the right store portfolio as we stand today. Certainly, we're pressure testing that decision. Every time a lease comes up for renewal, you know, the store, as we say, is on trial for its life in terms of what's its role in our portfolio. And we make sure that that store still has the right place in our portfolio. And, you know, we anticipate that we will still have closures, but they'll be of that kind of lease renewal type versus something that will be more proactive like we just did. One last point is a good amount of 145 stores is moving back to our M&A strategy. You're going to pick up some stores that, you know, are less well-situated than others. If you buy 10 locations, you might have two that you know down the road might encounter some problems. And I think a lot of that, the closures that we did in Q1 were some of that hygiene. Yeah, got you. Very, very helpful.

What does the store strategy look like from here? How aggressive can Monroe be from an M&A standpoint, opening new locations? Because there is a big opportunity. It's this question of pacing against that opportunity.

100%. And we definitely believe that the M&A opportunity that is there for the entire aftermarket is one that Monroe is well-positioned to capitalize on. We've been internally focused, focused on really delivering what we consider to be kind of the first leg of the stool of our long-term top-line algorithm, which is consistent comp growth. And we've done that over the last four quarters. We've delivered four consecutive quarters of comp store sales growth. First time we've done that in a few years. We delivered our first quarter, this past quarter, of two-year stack growth. First time we've done that in a few years. So we're starting to see those green shoots and some of those proof points related to the platform stabilization strategy that I talked about earlier. I think as you start to move on from that, then unit growth becomes the next logical conversation, particularly given the fragmentation, but also the white space that Monroe has. We don't have stores in Texas. We don't have stores in Arizona. We don't have stores in Colorado. Three very good states in terms of new vehicle registrations and population migration into those states. The question is one of timing. We still want to make sure that we don't take any foot off the gas and any distraction away from what we think is really important work that we're doing now. But at the same time, acquisitions don't always show up exactly when you want them. So I think our best way that I would describe us is we're preparing to prepare and thinking about thinking about kind of thing and making sure that we have the most, first and foremost, which I think we've accomplished, we have the balance sheet available to do it. You look at our balance sheet, I think we have $45 million of the last quarter in bank debt, you know, that's a 0.5x, 0.4x on our bank debt to EBITDA leverage, really affords a significant amount of dry powder for us when we're ready to deploy it. What we'd like to see is continued progress in our initiatives, and that truly and really translates into improved operating margin performance, because I think if that improves, we start to see the ROIC move, and we start to see the path towards really earning our right to grow.

Makes total sense. Let's dig into the factors that have driven this string of same-store sales increases, because it seems like it's a lot of internal initiatives, a lot of difficult execution factors that have led to more consistency. So as you think about what has contributed to the success that's happened over the last four quarters, How would you rank the various contributors to what has enabled the organization to achieve this?

Yeah, absolutely. I'll talk about it through the lens that we have talked about it on our earnings calls, which is through the four work streams. We touched a little bit upon each one, but maybe I'll just double-click on a few of them. The first, the closure of the stores. I think we need to spend more time on that, but it was very important to execute that quickly because what we didn't want FY26 to be was an exercise in drawn-out store closures where the organization was distracted from its growth initiatives by the store closures. And the truly important thing of that was our ability to get it done in two months. And then, obviously, a small team of our real estate and facilities are working on the monetization of the assets. But the organization itself really was able to move on from that before Q2 even started. it. And that's allowed us to focus on, I would say, the next mature area for us, which is our marketing efforts. I would say that the first thing I'll highlight is Monroe brought in a new marketing executive, Tim Farrell. And Tim came to us with experience at a private equity-owned auto service provider, as well as a publicly traded oil business. So in digital marketing really strong with the needs that we had in terms of acquiring new customers and retaining our existing customers so Tim you know in partnership with our Alex partners consultation team was able to first start to test out some of our of our marketing attributes one of the one big ones being really going after that higher value customer so as we talked about the value chain we know that we have a lot of our customers are in the low income hit cohort we were looking to get more customers in that moderate cohort that really showed higher lifetime value and the propensity to spend on all of the services and value the services that we offer not just looking for a price point and so you know through our partnership with the two parties and then also working with our you know Google and meta and things like that we were able to find some look-alike customers that we can now market to through through digital marketing and be a little bit more targeted it's not a perfect science but we can't wait towards more those customers that we want to see our ads that's net marketing initiative was scaled in our Q2 and by the end of our Q3 here we're over 900 stores in good results and seen really good results and in the you know we don't need to see it in all 1,100 of our stores because are certainly areas where it makes sense to not make the investment, but I'd say we're pretty much scaled at that number of stores. And we've seen really good returns in terms of return on advertising spend and also margin return on investment. And that means we're delivering more margin dollars than the advertising spend that we're making. So that's the first, I would say, big thing that is driving our business. And a lot of that spend is geared towards the tire category, and I think you can see the performance in our tires, while it has been pressured like the rest of the industry, we continue to believe we're taking share in the tire category, particularly tier

one through three. But if you optimize the partners you're dealing with, the way you're deploying your dollars, it can drive a much better return than how the allocation of those marketing dollars has been previously. That's correct.

That's correct, and it's been incremental spend as well. So what we did in Q1 and Q2 was really a rearrangement of the spend away from some channels into digital acquisition marketing and when we proved it out we then ramped up the spending on the digital marketing. In our Q3 we spent $6 million more in marketing acquisition marketing than we did in the prior year. That was largely funded by a $7 million reduction in G&A related to our store closures. So we're taking the benefits of the store closures reinvesting it back in the marketing program for our go-forward stores. There's still more optimization to do. We're going to start spending on different categories like oil in a more meaningful way and also trying out different channels than just pay-per-click. We've started a little bit of streaming, but there are other opportunities for us as we look at the digital channel. So that's the marketing benefits. More to come on that. Like I said, we didn't get to a full run rate on the marketing spend until the end of December. So we expect to continue another good investment in our fourth quarter marketing spend. The next piece would be the merchandising. Another leader that we brought in, Katie Chang. Katie came to us. She worked, I knew her from her previous life. She worked for one of our big tire distributors and also had experience at Lowe's working in strategy and category. So really good balance of industry contacts, industry experience, well respected in the industry that we operate in, but broad-based retail experience as well. And with Katie, we've gone on another kind of two-pronged path, the first being pricing. So with help from the Alex Partners team, we've launched a machine learning tool that's really taking multiple elements that can affect where the price should be of a tire, whether it's competitive set, whether it's placing the screen price relative to the step above or below it, the promotions that it has available to it, either company-funded or vendor, and the ultimate elasticity of that skew, that brand, to know how sensitive the consumer is to a price change. And we've optimized our pricing using that tool, again, testing it in Q1, rollout in Q2, full rollout in Q3. The result of it is that we've taken price up in some SKUs, down in other SKUs, but on balance, we're finding that it's more supportive of tire volume and tire profitability. We're expanding that into other categories, but started with tires, clearly our most important category in terms of being sharp on price. On top of that has been the transformation of the screen from one that was maybe a little bit watered down, too many selections at each tier, to one that's much more focused. And I think I talked about this just a little bit earlier, wanting to sell more out of our screen, to drive better margin, to drive easier in-store selling for our teammate and the guest. They don't need, and the guest doesn't want, a million choices. They can only put four tires on their car. They can't put them all. So they really just need our recommendation and to know that whatever we recommend, we have in stock and we stand behind. And for us, we've done that through partnering with our most trusted and valued strategic partners. And then it's very similar on the part side, concentrating a lot of our volume through fewer parts suppliers. It's allowed us to take advantage of the scale that Monroe has grown to enjoy.

And these are contributing to the margin.

Yeah, exactly. That's why we expect, as we look forward into next year, while we didn't talk about guidance, but we expect it to be a year we can grow and we can expand margins. It's on the backs of these initiatives. And then the final piece, I would say, is just the store operations, because obviously you can talk about all these other things, but if you don't deliver a good store experience, it's all for naught. So we're driving more cars to our stores is the intent through our marketing. We have better assortment while they're there across all of our services. And now we've just got to do a really good job. So to do that, we've really leaned on the Comfort Drive courtesy inspection as the backbone of that guest experience. The number one thing that you want a guest to leave with is the feeling of trust. And the way you can kind of institutionalize trust is to create a tool and a process that builds that trust, no matter who is working in the store that day. And Comfort Drive, we believe, helps us do that because it takes the recommendations and the update to the guests about their vehicle a little bit out of the store manager's hands and standardizes the way we present that through standard measurements, a standard red, yellow, green form, measured against gap standards. And even more importantly, now as we move into this year, we're really leveraging photos over maybe a year ago you would say one or two photos per comfort drive was the average we're now around six photos per comfort drive in

just to clarify this is a tablet-based technology that will take pictures of the underbelly of the car where you can directly point to the cut to the car the vehicle owner to say listen you're gonna eventually have to address this your your tires should be this thickness, they're this thickness, your shock is on the verge of X.

That's correct. Just for background, Monroe has always had a paper-based courtesy inspection form. It used to be really, I'll call it ugly. We updated it to be the red, yellow, green map standard, but it was still paper-based. Just like a paper-based schedule, as I mentioned earlier, from a corporate standpoint, from a field management standpoint, You don't really know if the store's doing it unless you get into the store and flip through every invoice and make sure that there's a courtesy inspection completed attached to the invoice, which now it's all structured data, and that's the biggest managerial change, is your ability to hold people accountable to the structured data that comes out of the system because it's now electronic, not to mention the trust and the benefit that it provides the guest by actually now having pictures and true measurements attached to the form.

Two questions in this regard. What is the internal thinking on being able to use artificial intelligence with this seemingly very congruent process where AI could be deployed? Just to give you a little bit of perspective, we had a session during lunch where we had an artificial intelligence expert came in and did some demonstrations. Coincidentally, one of the demonstrations was he typed into chat GPT or one of the LLMs, go find me new tires for my Tesla. And it went through Tire Rack. It went through all these different places where he was able to look. So then the question is, how are you able to deploy technology for doing some of the processes you have and to tap into some of this changing way that consumers are seeking the services that you offer to be best positioned to capitalize on that?

Yeah, it's a great question. We obviously have an AI roadmap that we're working through with our partners. I would say some early places where we see generative AI being deployed in our business, some no-brainer kind of places, first of all, we have a call center where currently we have a bunch of agents who are tier one. They take that call. Originally, the call would always go to the store, and we launched the call center a couple years ago and now have all of our stores on the call center to the point where most of the calls are going to the call center, not the store. The call center is then better equipped to handle that call. They don't have a guest in front of them. They're not running around through the bays. They can handle that store in a professional way, make sure we get their appointment scheduled for them at a time that they need, have visibility to other stores, and then also send the call back to the store. if they need expertise from the store manager. That tier one can, you know, we're moving towards basically a completely AI bot experience, AI agent experience. What will that allow us to do is invest in a tier two call center where that's where the people will be, and they will then be able to handle the questions that used to go to the store for clarification. Now we'll have a team of experts that can handle that next level. Moving the cost to higher value-add activities and further allowing the stores to truly be about walk-ins and the guest in front of you versus having to deal with the guest who's online. That now moves over to the same experience within our website, obviously in our appointment scheduling, to move into kind of that virtual artificial intelligence-based scheduling program and scheduling system versus the more point-and-click that we currently have. So that's the first wave. The second place that we're starting to use it is just through the reporting that we provide our field teammates. So we have dashboards that allow our field teammates to assess the health of their business. We've since rolled something out called the DM Toolkit, which connects the daily scorecard that shows you all your output metrics with KPIs, which are all the input metrics that affect the output metrics. And in between, we're leveraging artificial intelligence to come up with the recommendations that say this rhetoric is being moved because this metric is moving over here to improve this metric based on what we see. These are the three actions that should be taken in the store. Then from there, we develop a formalized action plan that both the store manager and the district manager sign off on. and now that's the accountability that we hold the store to make improvements. And then, of course, on the customer side, it might be a little bit further of a journey in terms of our artificial intelligence on the customer side other than the call center, but we are exploring ways where we can improve the guest experience through artificial intelligence, including things as simple as helping them to diagnose their own problems on the website so that they can better understand maybe what is happening to their vehicle before they decide to begin the shopping process. So if we were to bring this all together,

we established that the auto services industry is still very fragmented, meaning you probably still have a lot of small mom-and-pop players who are not able to do some of these things, and there's still meaningful markets here. Monroe has improved and optimized its asset base by closing stores and ensuring that the stores are properly supported. It's improved its merchandising, store operations. Now, if you take all of that and layer in what seems like some interesting artificial intelligence tools, does it enable Monroe to achieve some of its goals and success faster than it would have otherwise? And we probably couldn't have had this question a year ago, given some of the, not only progress that Monroe's made, but how fast this technology has developed. So are you more excited about the future given what's already taken place and what

you know? Absolutely, and I would say that a good example of it already, and I didn't even talk about it because we talked about it earlier, is the machine learning on the pricing tool, right? There's also back office behind the scenes. We're looking at demand planning through artificial intelligence as well and our sourcing strategy for min's and max's in the stores to optimize inventory. So I think a lot of these work streams that we have are going to be technology AI enabled, where, to your point, a few years ago last year we wouldn't have even considered that. I think that the initial reaction I would have, though, is we're doing the – We've done a lot of the foundational work already, maybe to bring the conversation full circle, that has been underappreciated, I think.

You know, nobody loves a good-looking basement, you know, but, I mean, maybe you do, but maybe not the cinder block part of it.

So we've built that foundation, but I think what we're building is the house on top of it at this point, and we think that there's a lot of, I think, value that will be unlocked for a lot of the work that we've already done and that these other opportunities that we have ahead of us will be accelerators.

We cannot wait to see how this all plays out. Please join me in thanking both Brian as well as Felix from Monroe on a great session.