Investor Presentation June 2020 Safe Harbor Statement and Non-GAAP - - PowerPoint PPT Presentation

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Investor Presentation June 2020 Safe Harbor Statement and Non-GAAP - - PowerPoint PPT Presentation

Monro, Inc. Investor Presentation June 2020 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


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SLIDE 1

Monro, Inc. Investor Presentation June 2020

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SLIDE 2

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, to include the significant uncertainty relating to the duration and scope of the COVID-19 pandemic and its impact on our customers, executive officers and employees. 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 https://corporate.monro.com/investors/financial-information/. Monro assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. In addition to including references to diluted earnings per share (“EPS”), which is a generally accepted accounting principles (“GAAP”) measure, this presentation includes references to adjusted diluted earnings per share, which is a non- GAAP financial measure. Monro has included a reconciliation from adjusted diluted EPS to its most directly comparable GAAP measure, diluted EPS in Slide 17. Management views this non-GAAP financial measure as a way to better assess comparability between periods because management believes the non-GAAP financial measure shows the Company’s core business operations while excluding certain non-recurring items and items related to our Monro.Forward or acquisition initiatives. 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.

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Safe Harbor Statement and Non-GAAP Measures

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SLIDE 3

Company Overview

  • 75% maintenance service, 25% tires
  • $675,000 a year in sales per store

−Tire brand stores – 784 stores (excluding wholesale)

  • 55% tires, 45% maintenance service
  • $1.0 million a year in sales per store
  • 8 wholesale locations and 3 retreadfacilities

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 markets

  • Fiscal 2020 sales of $1,256.5million
  • 1,260 company operated stores in 32 states and 98 franchised

locations as of June 12, 2020

  • 39 acquisitions in the past 8 fiscal years, adding 518 locations,$710

million in revenue and entry into 13 new states

  • Operating two store formats in key markets as of March 28,2020

−Service brand stores – 499 stores

Store locations as of 6/12/20

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SLIDE 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

Secondary parts distribution: Monro sources these parts from leading aftermarket parts suppliers:

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  • Brake Rotors and Pads
  • Filters
  • Steering and Suspension
  • Wipers
  • Belts

TIRES

Store locations as of 6/12/20

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SLIDE 5

300 290 280 270 260 250 240 230 220 210 200 2012 2013 2014 2015 2016 2017 2018 2019 2020* 2021* 2022*

A Favorable Industry Backdrop

Favorable Industry Backdrop for Automotive Services with the Vehicles in Operation Expected to Grow Significantly Over the Next Few 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

U.S. Light Vehicles in Operation (VIO)

  • Growing total vehicle population related to consumers
  • wning vehicles longer
  • 270+ million vehicles on the road
  • Increasing age of vehicles (average of ~12 years)
  • 2019 total annual miles driven up ~0.9% y/y
  • Increasing complexity of vehicles
  • Favorable demographics

Key Highlights

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Source: FRED Economic data, Moving 12-Month Total Vehicle Miles Traveled

20 18 16 14 12 10 8 6 4 2 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 2,775,000 2,850,000 2,925,000 3,000,000 3,075,000 3,150,000 3,225,000 3,300,000 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Source: Lang, IHS Markit. *2020 – 2022 are estimated figures

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SLIDE 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

120 110 100 90 80 70 60 50 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

+6.56% CAGR

  • .03% CAGR
  • Strong growth in new vehicles (0-5 years) between 2012

and 2017 is creating a significant tailwind for the 6-12year

  • ld vehicle cohort for the next few years
  • 6-12 year cohort expected to grow the fastest at+3.9%

CAGR for the period 2017-2022

  • Monro’s targeted market segment is the 6-12 yearcohort

120 110 100 90 80 70 60 50

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

  • 3.97% CAGR

+3.90% CAGR

Vehicles in Operation – 13+ Years

+4.27% CAGR +1.47% CAGR

120 110 100 90 80 70 60 50 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Source for all data: Lang, IHS Markit, 2018

Key Highlights

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SLIDE 7

A Favorable Industry Backdrop

Monro Operates in the $238 Billion Do-It-For-Me* Segment of $297 Billion U.S. Automotive Aftermarket Industry Automotive Aftermarket DIFM vs. DIY Sales

Source: Autocare Association Factbook

2010 % (outlets) 2018 % (outlets) CAGR Dealers 18,460 14.3% 16,753 12.7% (1.2%) General Repair Garages 76,108 58.8% 81,087 61.5% 0.8% Tire Dealers 18,675 14.4% 20,316 15.4% 1.1% Specialty Repair 8,663 6.7% 6,465 4.9% (3.6%) Oil Change/Lube 7,518 5.8% 7,301 5.5% (0.4%) Total 129,424 100.0% 131,922 100.0%

Source: Autocare Association Factbook

  • DIFM continues to gain share fromDIY

segment

  • Vehicle complexity continues to drive shift to

DIFM from DIY

  • Future technology advances expectedto

accelerate shift to DIFM

DIFM vs. DIY Trends

  • Industry still highly fragmented, with significant
  • pportunities for further consolidation

Key Highlights

* Includes Replacement Tire Segment

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  • 2012

2013 2014 2015 2016 2017 2018 DIFM DI Y 300,000 250,000 200,000 150,000 100,000 50,000

Consensus data for 2012; estimates for 2013-2018

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SLIDE 8

Driving Long-Term Sustainable Growth

Enhance Customer-Centric Engagement

  • Customer retention
  • Customer acquisition
  • Omnichannel

Accelerate Productivity & Team Engagement

  • Optimized store staffingmodel
  • Clearly defined career pathand

enhanced training program

  • Aligned compensation

Improve Customer Experience

  • Online reputationmanagement
  • Consistent in-storeexperience
  • Consistent store appearance

Scalable Platformto Drive Sustainable Growth

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Investments in Technology and Data-Driven Analytics to Support Strategic Initiatives

Optimize Product & Service Offering

  • Redefined selling approach
  • Optimized tire assortment
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SLIDE 9

Monro.Forward Progress Update

Enhance Customer- Centric Engagement

Monro.Forward Progress Positions Us Well to Emerge Stronger Post COVID-19 Crisis  Data-driven store scheduling and staffing software in pilot stages with full rollout expected to be completed by Q2FY21  Optimizing staffing schedules during COVID-19 crisis and beyond  Rolled out the Monro University program across store base and are expanding course content  Implemented mandatory onboard training to support new hires

Accelerate Productivity & Team Engagement

 New pricing and category management technology to drive margin improvement and

  • ptimize product portfolio in pilot stages, rollout to be completed by end of Q2FY21

Optimize Product & Service Offering

 Executing 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 4.6 All-time  Modernized store infrastructure, including new digital phone system, progressing as planned  Recently expanded Amazon.com collaboration at more than 1,000 stores, supporting

  • mnichannel efforts

Improve Customer Experience

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SLIDE 10

 Strong performance of rebranded stores in Q4FY20 prior to COVID-19  Substantially completed transformation of 42 recently acquired California locations during Q4FY20  Pre-COVID-19 plan to close 42 stores, six in Q4FY20 and 36 in Q1FY21, to streamline portfolio supported by data analytics

Improve Customer Experience

Store Rebrand & Reimage Initiative is an Important Part of Company Transformation

Store Rebrand & Reimage Initiative

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SLIDE 11

Monro.Forward: Investments in Technology

Significant Investments in Technology to Support Monro.Forward Strategy

Area Strategic Rationale Timing Business Intelligence

  • KPI dashboards for stores and management
  • Launched in Q4 FY18
  • Ongoing company-wide expansion

Monro University Learning Management System

  • Ensures consistent onboarding and teammatetraining
  • Develop clear career paths
  • Deliver standard operating procedure training
  • Launched in Q3 FY19
  • Ongoing expansion across store base

Store Network Infrastructure Upgrade

  • Enable and support cloud based merchandisingstrategy
  • Enable customer-facing technology
  • Installed in 840 stores
  • To be implemented across base by Q1

FY21 Digital Phone and Customer Communication System

  • Eliminate cost of analog phone system
  • Simplify phone execution for store personnel
  • Enable customer-centric call and text messaging management
  • In more than 700 stores
  • To be implemented across base by Q1

FY21 Store Staffing Model& Scheduling System

  • Eliminate paper-based scheduling
  • Optimizes store staffing and day part scheduling
  • Improves part-time scheduling capabilities
  • Pilot in Q4 FY20
  • To be launched across base by Q2 FY21

Tire Category Management& Pricing System

  • Enterprise solution to dynamically manage pricing at the SKU level
  • Partially automates optimization of tire volume/margins by providing

real-time elasticity

  • Pilot launched in Q4 FY20
  • To be launched across base by Q2 FY21

Cloud-Based Car Inspection Scanning Tool

  • State of the art technology for technicians to provide industry-

leading service

  • Provides efficient tool for actively managing customer needs
  • In pilot stages
  • To be implemented in FY21

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SLIDE 12

Omnichannel: Amazon.com Collaboration

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
  • nline from Amazon.com and select the Ship-to-Store option
  • Expanded collaboration to an additional 378 stores during Q1FY21,

increasing the amount of service locations to over 1,100 stores

  • By July 2020, Monro expects to have rolled out its Amazon tire installation

services to all of its more than 1,200 locations in 32 states

  • Increased traffic driven by integration with online tire retailers

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SLIDE 13

Scalable Platform to Drive Sustainable Growth

  • Continue to increase store density in our 32 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 A Scalable Business Model with Multiple Avenues for Growth

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SLIDE 14

A Proven M&A Strategy

Monro’s Acquisition Strategy Has Delivered Significant Growth Over the Years

A Proven Track Record

  • 39 acquisitions in the past 8 fiscal years, adding 518 locations and $710 million in revenue
  • Entered 13 new states, expanding our presence in the Southern and Western markets
  • Average acquisition size:
  • 13 stores
  • ~$20 million in annualized sales growth

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1Greenfield stores include new construction as well as the acquisition of one to four store operations

Recent Acquisition Activity in Fiscal 2020

  • Expanded geographic footprint into the Western region with acquisitions of 51 stores and one

distribution center in California, 14 stores in Nevada and four in Idaho, all new states for Monro

  • Further solidified position in Southern markets with acquisitions of 20 stores in Lousiana, which

represents a new state for Monro

  • Added 10 greenfield1 locations during the year (excludes two California stores that are included above)
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SLIDE 15

COVID-19 Response

Executing on Key Priorities During This Critical Period

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  • Protecting the well-being of our

teammates

  • Promoting the safety of our

customers and communities Prioritizing health & safety in all aspects of

  • ur business
  • Providing essential services to

support customers’ needs and delivering a consistent 5-star experience

  • Maximizing financial flexibility

and operating on a cash flow positive basis in COVID-19 environment Ensuring business continuity to serve our customers

  • Executing strategic

Monro.Forward initiatives

  • Streamlining costs and rapidly

adjusting plans to strengthen

  • perating performance

Emerging stronger post COVID-19 crisis

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SLIDE 16

3.5% 1.5%

  • 0.5%
  • 2.5%
  • 4.5%
  • 6.5%
  • 8.5%
  • 10.5%

4QFY19 1QFY20 2QFY20 3QFY20 4QFY20

Fourth Quarter Fiscal 2020 Highlights

  • Comparable store sales of -9.5% driven by a

substantial decrease in traffic since mid-Marchdue to COVID-19 restrictions, as well as soft winter weather conditions in January and February

  • Sales from new stores added $23.5M,including

sales from recent acquisitions of $21.9M

  • Maintenance: -8%
  • Tires: -9%
  • Front End/Shocks: -10%
  • Brakes: -11%
  • Alignments: -11%

Q4FY20 Key Highlights Q4FY20 Key Highlights

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Navigating Uncertain Environment and Challenges Related to COVID-19 Quarterly Comps Trends Monthly Comparable Store Sales

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1Results are adjusted for days 2Through 5/26/20

  • 50.0%
  • 40.0%
  • 30.0%
  • 20.0%
  • 10.0%

0.0% Jan-20 Feb-20 Mar-20 Apr-20 May-20 MTD2

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SLIDE 17

Results Impacted by COVID-19 Crisis and Soft Winter Weather Conditions

Fourth Quarter Fiscal 2020 Results

1Q4FY19 and FY19 same store sales results are adjusted for days. 2Excluded costs in Q4FY20 include $.10 per share of impairment costs related to planned store closures, $.05 per share of additional store impairment costs, $.03 per share of costs related to Monro.Forward initiatives, $.01 per share of costs related to litigation settlements and $.01 per share of one-

time costs related to the Company’s headquarters expansion. Excluded costs in Q4FY19 include $.01 per share of costs related to Monro.Forward initiatives and $.01 per share of costs related to acquisition due diligence and integration. Excluded costs in FY20 include $.15 per share of store impairment costs, $.09 per share of costs related to Monro.Forward initiatives, $.03 per share of costs related to acquisition due diligence and integration and $.02 per share of additional one-time costs related to litigation settlements and the Company’s headquarters expansion. Excluded costs in FY19 include $.06 per share in costs related to Monro.Forward initiatives, $.01 per share of non-recurring corporate and field management realignment costs and $.02 per share of costs related to acquisition due diligence and integration.

3Adjusted Diluted EPS is a non-GAAP measure that excludes certain non-recurring items and items related to our Monro.Forward or acquisition initiatives. A reconciliation of net income to adjusted net income and diluted EPS to adjusted diluted EPS is included in our earnings release dated May 28,

2020.

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Q4FY20 Q4FY19 Δ FY20 FY19 Δ Sales (millions) $286.1 $287.2 (0.4%) $1,256.5 $1,200.2 4.7% Same Store Sales1

  • 9.5%

0.5% (1,000 bps)

  • 2.3%

2.3% (460 bps) Gross Margin 35.7% 38.3% (260 bps) 37.9% 38.8% (90 bps) Operating Margin 0.1% 9.9% (980 bps) 8.1% 10.6% (250 bps) Diluted EPS ($.12) $.50 (124.0%) $1.71 $2.37 (27.8%) Excluded Costs2 $.20 $.02 $.29 $.09 One-time income tax benefit

  • ($.06)

Adjusted Diluted EPS3 $.08 $.52 (84.6%) $2.00 $2.40 (16.7%)

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SLIDE 18

Fourth Quarter Fiscal 2020 EPS Bridge

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($0.30) ($0.12) $0.08 ($0.10) ($0.10) ($0.12) $0.50

  • $0.20

$0.00

  • $0.10

$0.10 $0.20 $0.40 $0.30 $0.50 $0.60 Q4 FY19 Diluted Impact of -9.5% Comp COVID-19 Business Q4 FY20 Adjusted Planned Store Other N/G Q4 FY20 Diluted Earnings Per Share - Sales Impact Diluted Earnings Per Closures Adjustments Earnings Per Share - GAAP Share GAAP

1Other N/G Adjustments includes $.05 related to store impairment charges, $.03 of one-time costs related to the store rebrand and reimage initiative, $.01 in provisions for legal settlements and $.01 in one-time costs related to the HQ expansion.

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SLIDE 19

Maximizing Financial Flexibility

We Have Taken Proactive Measures to Operate on a Cash Flow Positive Basis During COVID-19 Pandemic

Disciplined Capital Allocation

Fiscal 2020

  • Capex of $55.9M, of which $25M was related to

store rebrand and reimage

  • Spent approximately $104M on acquisitions
  • Paid $30M in dividends during FY20

Near-term Priorities

  • Deferring non-critical capex including store

rebrand and reimage initiative

  • Pausing M&A during this uncertain time
  • Paying dividend in June 2020

Additional Actions to Enhance Financial Flexibility

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  • Drew down remaining $350M from revolving credit facility in March 2020
  • Reducing selling, general and administrative expenses with focus on flexing cost structure
  • Bolstering working capital position
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SLIDE 20

Fiscal 2020 Accomplishments

Strong Progress on Building a Scalable Platform For Sustainable Growth Store Rebrand and Refresh Initiative: Completed transformation of 219 stores to date, migrating 71 stores to a tire-oriented brand, with rebranded stores in key markets outperforming store base Investments in Technology: Launched pilot stages of network infrastructure upgrade, store staffing cloud-based model and tire category management pricing tool, which are all progressing on track Strategic Acquisitions: Completed acquisitions of 89 stores and one distribution center, expanding geographic footprint into the attractive Western region and further solidifying position in the South Expansion of Amazon.com Collaboration: Expanded collaboration to over 1,000 stores in 32 states in Q1 FY21 to support online tire retailer installation strategy and omnichannel efforts Customer Experience: Executed customer satisfaction and online reputation management program across store base to drive increased online reviews and star rating to all-time high of 4.6

1 2 3 4 5

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SLIDE 21

Fiscal 2021 Outlook

While Environment Remains Uncertain, We Are Focused on Elements in Business Within Our Control and Are Well-Positioned to Deliver Long-term Value Once the COVID-19 Crisis Subsides

  • Not issuing FY21 guidance at this time due to uncertainty surrounding COVID-19 pandemic
  • Expect COVID-19 to have a significant impact on Q1 FY21 results
  • Streamlining costs and making continued progress on Monro.Forward initiatives to emerge

stronger once pandemic subsides

  • Rollout of cloud-based store scheduling model and tire pricing tool by end of Q2 FY21 will be

critical to driving margin improvement

  • Cautiously optimistic for demand recovery following the suspension of stay-at-homeorders
  • Well-positioned to capitalize on significant opportunities for M&A post COVID-19crisis

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SLIDE 22
  • Leading chain of Company-operated undercar care facilities in the U.S. with a wide breadth of

product and service offerings

  • Strong position in Northeast, Great Lakes and Mid-Atlantic and expanding into Southern and Western

markets with a presence in 32 states

  • 19 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
  • perational 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 through dividend program

Investment Highlights

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SLIDE 23

Appendix

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SLIDE 24

Fiscal 2021 Outlook – Financial Assumptions

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Assumptions as of May 28, 2020 Tire and Oil Costs Stable to slight decrease year-over-year Interest Expense ~$30 million to ~$32 million Depreciation and Amortization ~$72 million to ~$78 million Tax Rate ~24% Capital Expenditures ~$25 million to ~$45 million Weighted Average Number of Diluted Shares Outstanding ~34 million Planned Store Closure Costs in Q1 FY21 ~$2.5 million Store Closure Operating Income Benefit ~$3.8 million Fixed Cost Reductions ~$10 million to ~$15 million

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SLIDE 25

7 Stage Transformation Process from Beginning to End Takes ~17 Weeks

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1Steps are only required for stores that are being rebranded from service format to tire format

BEFORE AFTER

Store Readiness for Change Parts Inventory Rebalanced1 Inventory Assortment Reset for Tire Focus1 Store Team Trained

  • n New Operating

Procedures Store Inventory Storage Configured for Tires1 Store ExteriorPainted and New Signage Installed Store InteriorRemodel and Technology Installed

~17 WEEKS

Store Refresh Transformation Timeline

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SLIDE 26

Q4 FY20

FY21

Monro.Forward Strategic Initiatives

Data-driven “new customer” marketing Store staffing & scheduling system

Improve Customer Experience Enhance Customer-Centric Engagement Optimize Product & Service Offering Accelerate Productivity & Team Engagement

Scheduled maintenance in-store selling Data-driven CRM New websites

Q2 FY20 Q3 FY20

Scale store refresh & operational excellence

= Completed Initiatives

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Pilot store refresh &

  • perational excellence

Monro University (includes career path, LMS)

Foundational Technology& Tools

Store network infrastructure upgrade Digital phone and customer communication system Optimize tire assortment Cloud based car inspection tool Tire category management & pricing system

FY19

Q2 FY19 Q3 FY19 Q4 FY19

FY20

Q2FY21

New store comp plans New in-store sales packages