Hello, everyone, and welcome to the Q3 2024 Advance Auto Parts Earnings Conference Call. My name is Charlie, and I'll be coordinating the call today. You will have the opportunity to ask a question at the end of the presentation. [Operator Instructions] I'd now like to hand the call over to our host, Lavesh Hemnani, Vice President of Investor Relations to begin. Lavesh, please go ahead.

Good morning, and thank you for participating in today's call. I'm joined by Shane O'Kelly, President and Chief Executive Officer; and Ryan Grimsland, Executive Vice President and Chief Financial Officer. Before we begin, please be advised that management's remarks today will contain forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including but not limited to, statements regarding our strategic and operational review, initiatives, plans, projections and expectations for the future. Actual results could differ materially from those projected or implied by the forward-looking statements. Additional information about forward-looking statements can be found under forward-looking statements in our earnings release and risk factors in our most recent Form 10-K and subsequent filings made with the SEC. During today's call, we will be referencing slides which are available to view via webcast. A copy of the slides have also been posted to our Investor Relations website. In addition, we have also filed historical financials for the Advance RemainCo that can be accessed on our website. We will begin today's discussion with an overview of our third quarter 2024 results. After that, Shane will provide an update on our strategic path forward. Then, Ryan will discuss our financial objectives for the next three years. Following management's prepared remarks, we will open the line for questions. Now, let me turn the call over to Shane O'Kelley. Shane?

Thank you, Lavesh, and good morning, everyone. This morning, Advance took a big step forward on its journey to operational excellence and value-creation. Our entire management team is confident, focused and excited. Today, we will discuss Q3 results, our near-term outlook and our strategic path forward through 2027. As you'll note from our earnings release this morning, we have provided you with a lot of information. With the successful completion of the Worldpac transaction, we have outlined the financial position of Advance Auto Parts RemainCo so that you have a clearer and fuller picture of where we are, where we are heading and how we will measure our progress along the way. I feel that what's been done so-far is working. It is very satisfying for me to see that with the team effort involved, we now have line of sight to achieve our 2027 outlook, which I'm delighted to share with you today. We are laying out a plan to deliver anticipated adjusted operating margin of approximately 7% by year-end 2027. My confidence in achieving these goals stems from approximately 500 basis-points of expected improvement that will be driven primarily by factors within our management team's control, including merchandising excellence, internal supply chain transformation and store efficiency. Before we get into those details, I would like to express my gratitude to the more than 65,000 hard-working team members at Advance whose efforts during the recent hurricanes has been exceptional. We are thankful to our many associates who partnered with local communities to bring relief to those impacted with efforts ranging from helping reopening our stores to leading donation drives. This quarter, results came in below our expectations as the sales softness that began in early Q3 persisted throughout the quarter. Macro headwinds and economic uncertainty continue to weigh on the consumer spending, while our results were also impacted by other events such as hurricanes and the CrowdStrike outage. We are pleased to have made progress on our strategic actions, including the completion of the sale of Worldpac and a comprehensive productivity review of our assets. This review has identified opportunities to improve our adjusted operating income margin over the next three years through a broad range of actions, including a realignment of our stores and DC portfolio. Over the past year, I have spent a considerable amount of time at our stores and in our distribution centers, meeting with our team members, vendors and customers. Throughout these conversations, one common thread that emerged is Advance's rich legacy and the important role we play in the industry and in the lives of our customers. With that foundation, today, we are excited to share our strategic and financial plan for the next three years. But first, let me pass it on to Ryan to discuss our Q3 results. Ryan?

Thank you, Shane, and good morning, everyone. Following the successful sale of Worldpac, we have made certain changes in the presentation of our financial statements. First, our results show a breakdown of discontinued operations related to Worldpac and continuing operations reflecting results for the Advance business. Second, to provide a better understanding of our underlying operational performance, we report certain financial measures on an adjusted non-GAAP basis to exclude the impact of certain items. Our guidance and financial plan for the next three years is based on these adjusted financial measures. Lastly, our results were also impacted by certain atypical items that are not included in the non-GAAP adjustments, which I will discuss shortly. In our view, looking at our reported results through this lens will provide more helpful understanding of our performance. Now, let's turn to reported results for Advance continuing operations. Net sales from continuing operations were $2.1 billion, a 3% decrease compared with Q3 last year. Comparable store sales declined 2.3%, driven by continued softness in the overall consumer spending environment. In addition, two other events impacted us this quarter. First, our store and server systems were impacted by the global CrowdStrike system outage due to which stores were temporarily unable to serve customers and close transactions. Second, later in the quarter, Hurricane Helene impacted sales at over 300 stores. We estimate both these events combined accounted for approximately 50 basis point headwind to Q3 comp. Without these events, our two-year comparable sales growth would have been about in line with the second quarter and our expectations. In terms of channel performance, both pro and DIY declined in the low single-digit range, with pro performing relatively better. Importantly, on a two-year basis, our pro comp was positive and accelerated compared with last quarter. During Q3, transactions declined…

Thank you, Ryan. It's an honor to lead this company and work alongside so many talented team members. I am confident in the team's ability to execute our strategic plan and deliver stronger results. To that end, I would like to begin by highlighting the key drivers of our turnaround. Number one, we're a leading player in the more than $150 billion auto aftermarket industry that has strong demand drivers. We believe that this plan will position us to grow by serving millions of customers through our extensive store network where we have the right to win. As a reminder, even incremental improvements in our performance can yield substantial results. Number two, our strategy is centered on getting back to the fundamentals of selling auto parts. The slope of our improvement will be determined by the multitude of smaller decisions made by our team and we are embedding industry-best practices in our operations and focusing on executing a clear strategic framework to elevate the performance of the advanced blended box. Number three, our leadership team brings deep automotive experience with broad retail fundamental expertise. In addition, following the Worldpac sale, we will also have an enhanced liquidity position, providing incremental capital to execute our plan. Number four, we completed a thorough assessment of operational productivity across our asset base and identified opportunities to improve profitability. We believe our plan, including store footprint optimization, will enable us to narrow our margin gap to the industry. And number five, we are now introducing our goal to deliver approximately 7% adjusted operating income margin by the end of fiscal 2027. We expect to achieve this by stabilizing the business to deliver stronger productivity. This will provide a strong foundation to subsequently deliver value for our shareholders over time. Now, let me discuss each…

Thank you, Shane. I'm am excited to share our financial roadmap through fiscal 2027 and plans to deliver value for our shareholders. Our financial plan reflects progress on achieving greater operational productivity through our strategic actions. As we discussed our financial plan today, both Shane and I recognize that we need to build a track-record of success. Over the past several months, we have dedicated our time to diving into the business, understanding the opportunities that lie ahead and building a plan backed by solid fundamental actions with measurable KPIs to track progress. We are focused on four key areas to enhance shareholder returns over the next three years and beyond. First, we are optimizing our asset portfolio through store closures and SG&A reductions to provide a healthy foundation for long-term growth. Second, as Shane mentioned, we have identified over 500 basis points of margin opportunity over the next three years from operational efficiencies in merchandising, supply chain and store initiatives. Importantly, we do not view this as the final destination, but the beginning of our continued operating margin expansion in the future. Third, we believe that we have ample liquidity for investment in high-return projects across critical areas to support our growth. This includes building our multi-echelon network and accelerating new-store openings. And fourth, we anticipate our strategic actions will enable us to improve cash generated from operations, driving an improvement in free cash flow even as we step-up capital expenditures over the next few years. While we have already begun executing part of our plan this year, the largest portion of the implementation is not expected to begin in full earnest until 2025. As a result, we expect these benefits to start showing meaningful progress in 2026 and beyond. During the implementation, we will be measuring the success…

Thank you, Ryan. In closing, I want to thank everybody for joining our call today. We hope today's presentation provided a clearer view of our path forward and our opportunities for growth. Each leader in our organization is committed to delivering against our three-year plan. I would like to thank our team members once again for their continued dedication to serving our customers while we take the required actions to fuel the improvement and long-term growth of the company. With that, let's open up the call for questions. Operator?

[Operator Instructions] Our first question comes from Michael Lasser of UBS. Michael, your line is open. Please go ahead.

Good morning. Thank you so much for taking my question. It's on the long-term outlook. How much reinvestment have you assumed that you will need to make from the cost savings into the business over the next couple of years? And as part of that, have you assumed that you will be able to maintain your vendor financing program as it currently stands moving forward? Thank you very much.

Hey, thanks, Michael. Yeah, the -- on the supply chain finance piece, yeah, we are factoring in, we're maintaining the ability of the $2.8 billion is roughly where we're targeting. That might fluctuate up or down a little bit as we continue to work with our vendor partners. But we're targeting the $2.8 billion, targeting that we will have the capacity to support the $2.8 billion going forward. From a reinvestment standpoint, we feel like we're at a good SG&A level. We'll have obviously some inflation going forward. But I think in our guide, we factored in incremental CapEx that will be part of that investment. So, moving up to $300 million on average per year, that might fluctuate a little bit depending on the timing of some of those initiatives, but that's the reinvestment we're making more on the CapEx side. On the cost savings side, we're bringing a lot of those cost savings to the bottom-line and that's somewhat offset by inflation going forward, but factored into our guide.

Got you. Thank you very much. My follow-up question is, philosophically is the plan to say, hey, you know that Advance Auto can compete effectively in the marketplace as a leaner, more nimble, more regional type of organization and there's evidence to support that from the fact that there are strong regional players in the market already because closing stores, getting out of markets would suggest that the store growth, the ability to be a national retailer is going to be limited over time. So if you could just give us a sense of what the long-term vision on how Advance is expecting to compete with this plan, that would be great. Shane O’Kelly: Hey, Michael. It's Shane. Good morning. Thank you for the questions. We have no doubt that we can compete and that evidence strongly exists today. We don't need to look at regional players. We just look internally at our company. And where we have density, we perform and we see that in numerous markets. And if you look at how we'll be post store closing, we'll be number one or number two in terms of density in 75% of our markets. So, when you do a bell curve of our store performance, we see plenty of locations where we not only compete, we thrive, we win. And so, the idea is to focus on that, get back to winning, deliver the economic numbers that we've depicted today. And during that journey, we returned to growth, which includes opening new stores. So, I don't think about it in terms of national or not national. We just -- we think about it in terms of where we can win, where we can grow and then start doing that.

Thank you very much and good luck. Shane O’Kelly: Thanks, Michael.

Thank you. Our next question comes from Chris Horvers of JPMorgan. Chris, your line is open. Please proceed.

Thanks. Good morning, everybody, and thanks for the presentation. So, my first question is, understanding that you do have less sales in the fourth quarter and you're going to deleverage, but it seems like you're implying a down 5% operating margin. So, I guess, the question is, are there one-time costs that are included in 4Q non-GAAP that aren't per se recurring or continuing? So, related to that, on Slide 7, it seems like you're saying that the 0.8% adjusted operating margin, and 3Q included, like, 125 basis points of what -- things that won't necessarily repeat next year?

Yeah. Thanks, Chris. You're doing the math right. Q4 is going a little bit down, close to what you're saying there. It's more of recycling a couple of things that happened last year. There's a -- we're factoring in some disruption given the turnaround right now. You'll see some disruption in sales. And our gross profit rate in Q4 is traditionally the lowest gross profit rate in the year. There's a couple of things impacting that gross profit rate, but nothing that's -- we're adjusting out the strategic initiatives. So, that's out of that guide. But we're factoring in just a little bit of risk adjustment in Q4 relative to us being prioritizing this turnaround and the store closures. But really, the gross profit traditionally in Q4 is a lower rate, and that's driving it as well.

And then -- so am I right on Slide 7 that 3Q had 125 basis points of stuff that you're putting in the adjusted, but you're saying won't necessarily recur next year. And as you think about the bridge, the '25, you're modeling 200 basis points of operating margin expansion, sort of midpoint to midpoint, how much of that expansion would you say is discrete lapse, like, one time costs, one time impacts, whether it's the weather or that gets you to that level of expansion year-over-year?

Yeah. The 125 basis points is just kind of those things that pop up during the year like the hurricane, the CrowdStrike impact on our system. There are other items in there. So they're kind of atypical items that aren't necessarily part of the normal run of the business. So that's the 125 that we're calling out. Not typically something that's in the adjustment.

Yeah. And then how much -- is there -- how much of that 200 next year is sort of execution free, i.e., there were unique cost and unique disruptions this year that maybe you put into results -- adjusted results, but you have clear line of sight of getting those costs back next year?

Yeah. The 200 going in next year is just you've got the store closures that are coming in, that's the easy one. We're executing those. Those are popping in. margin improvements that we're seeing as we partner with our vendors. The 200 is clear line of sight on our business actions and objectives. That's really what's driving the increase next year.

Understood. Thanks very much.

Thank you. Our next question comes from Scot Ciccarelli of Truist. Scot, your line is open. Please go ahead.

Thank you. Good morning, guys. So it looks like COGS is supposed to be the biggest driver of your expected EBIT improvement both in ‘25 as well as for your three-year plan. Can you guys break it down a little bit more for us? Meaning, how much of that improvement is supposed to come from supply chain, how much from better promotional management, just so we can understand the -- what's really going to drive that improvement in COGS? Thanks.

Yeah, Scot, thanks for the question. I'll give you some general themes. We’re not going to give you specific ones, but we are excited about where we're going with the COGS improvement. It's broken down between both improved costs, first cost as we partner with our vendors. There's pricing and promotional improvement in there as well. We know we have work to do to improve the effectiveness of our promotional cadence, the scale, the size of those, the effectiveness of them and then our pricing and where we're pricing and it's mainly to our pros and making sure that we've got the right pricing structure for our pros. Supply chain is a portion of that. the supply chain, as we continue to consolidate our DCs and our market hubs, that is a longer tail than say, probably the merchandising piece of this. So if you're looking at the COGS improvement, probably a larger portion of that COGS improvement is coming from the merchandising excellence portion.

And how would you guys kind of rate or rank your confidence in the ability to drive that gross margin improvement because obviously, like, this year hasn't necessarily played out maybe the way you originally anticipated. So, just trying to understand, again, a little bit better on confidence levels of the gross margin improvement going forward? Thanks. Shane O’Kelly: Hey, Scot, it's Shane. Great question. Thanks for asking. I'm very confident and the reason starts with leadership. So, what we're now starting to see is the impact of the changes we've made with key leaders. So, Bruce Starnes has joined us from Target. He's started to build an outstanding team. And I saw this as we were out in Apex meeting with vendors, both in terms of discussions with existing vendors and working collaboratively to develop plans that support what we're trying to do, also from vendors we haven't worked with who've now said, hey, how do we -- how do we think about working with Advance. So, he's digging in on a number of retail fundamentals, the PLR process being one, availability being another. And so, as he goes through those, what I would consider tried and true merchandising activities that his previous company would be known for, those will yield results for us.

Thank you very much.

Thank you. Our next question comes from Simeon Gutman of Morgan Stanley. Simeon, your line is open. Please go ahead.

Hi, this is Zach on for Simeon. Thanks for taking our questions. Shane, realize the company is completely different than two, five and even 10 years ago. As you know, there have always been margin goals much higher in the future and margins have only contracted over time. So, why is this time different? And touching upon the earlier question, sort of what gives you confidence on the target you set out? Shane O’Kelly: Yeah. Hey, thanks, Zach. Appreciate the question. I can't speak to the past in terms of different decisions and promises made. For this management team, we want to improve our say-do ratio. We're confident in what we're doing and I think about that in terms of the tail of the tape. So, been here a year. And so let's just review briefly what's transpired. Came onboard, depicted that we would do decisive actions. Started a strategic review, said, hey, we'll investigate the sale of Worldpac. We sold Worldpac. We picked-up $1.5 billion for that. We've shored up our balance sheet. We looked at Canada. We like Canada. We're keeping Canada. We invested in the supply chain. We looked at it and said, hey, we've got disparate supply chains, let's move to a consolidated supply chain. We've made that action. We looked at our frontline, said, what are the roles, what's the compensation, what's the training? We made those changes. We looked at our leaders and said, where do we need key leaders in key areas. We've made a number of those changes. And now, as we go forward, we looked at the store base, not easy. We went across every store in the network across -- we depicted three criteria. We actually had a broader list. We evaluated every one of our locations. We made an…

That's helpful. Thank you. And then, just as a follow-up, so with the business comping down low single-digits, is this industry weakness or share loss and maybe it's a little bit of both? And can you help us think about the path back to positive territory moving forward?

Yeah. So, the weakness that we've seen recently is a little bit on the DIY side and we do see the consumer being pressured. What we are excited about is on a two-year basis, our pro comp trend actually accelerated in Q3. It's just more on the comparable side of it. So, there is a little bit of pressure on the consumer right now. This industry is pretty resilient in these times. I mean, at some point, you still have to start and stop your car. And so, the push off of discretionary purchases, less of an impact here, it's more short-term in nature. So, we've got a good strong industry backdrop, but there is a little bit of pressure more recently on the consumer and that's showing up in the DIY comps.

Thank you.

Our next question comes from Seth Basham of Wedbush. Seth, your line is open. Please go ahead.

Thanks a lot and good morning. Thank you for the presentation. First, just some clarifying questions regarding the guidance for 2025. First, on adjusted EPS basis, what are you aiming for there to help us get a sense of the below the operating margin line moving pieces?

Yes. Good question. We are going to come back in Q4. We'll probably give more details on EPS and we'll refine the guidance for '25. So, we gave the operating income 2% to 3%. I would expect low single-digit share dilution. So, if you're doing the math, just think of that for next year, low single-digit share dilution, you should be able to get to a decent EPS range based on that.

Okay. And relatedly, regarding free cash flow in 2025, inclusive of some of these restructuring efforts, what are you aiming for in that area?

Yeah, it includes -- 30 to 40 is included in that.

Okay. And then, just lastly, bigger-picture question. There's a lot of change that you guys have in your plan, managing that change and executing on it is critical factor as you mentioned, Shane, you have accountability targets, you have teams set up. Where, if you go wrong, do you think are the biggest risk to execution? Shane O’Kelly: Yeah. So, anytime you're executing broad-based plans, you need to make sure you're appropriately comprehensive. You need to make sure you're communicating thoroughly, need to make sure that you've resourced it correctly. And so, we know that running the existing business and executing this simultaneously does present degrees of risk and we need to execute against that. We brought in support. Alvarez & Marsal is working with the company and has been helpful in terms of how we think about this and how we'll go against the closure cadence. We've got additional support as it relates to negotiating with landlords on different leases. We're bringing in support as it relates to how we think about moving inventory in terms of whether we sell it in place, whether we decide to relocate it. And so, that's a key dimension of it. But we're confident in terms of our ability to do it and it's consistent with how we've been running the company since I've been here and we'll go through it and continue to focus on the fundamentals. The remaining company in terms of where we're located and how we'll operate, you'll see an ability for us to execute those three pillars, so in terms of the store operations, in terms of merchandising excellence, in terms of the continuation of the supply chain consolidation.

Thank you.

Thank you. Our next question comes from Steven Zaccone of Citigroup. Steven, your line is open. Please go ahead.

Great. Good morning. Thanks for all the detail today. And I appreciate you taking my question. I wanted to shift back to the top line discussions. Could you just help us understand, the fourth quarter comp sounds like it's going to be down. You gave some quarter-to-date comment that it's running in line with the third quarter. Is that excluding like the hurricane impact and the CrowdStrike? And then, if we look forward, right, you've given this preliminary outlook for '25 and then what you think 2027 will be. How do you think about the market growth rate for next year? And then, maybe as you think about your ability to take market share, where is the bigger opportunity? Is it on the pro side or is it on this DIY getting better?

Yeah. So, I'll take the first part of that. The first part, so we did back-out the hurricane impact to [say] (ph) the trends from Q3 to Q4 in line. So, you would adjust for the hurricane and CrowdStrike impact on that to get to kind of where our trends are going into the quarter. Shane O’Kelly: Yeah, I'll start -- let me talk about the market for next year in terms of how we return to positive comps. I think we'll have progress in both arenas. On the DIY side, Ryan touched on it, the consumers definitely had a bit of a hangover coming out of COVID. I think election jitters, so -- and in the low cohort familial spend categories of 50K, 75K family groups. That group has been deferring wherever possible. So, we'll look for that market to return. And so, we'll participate in that spend. But we're also very excited about what we're doing in the pro arena. So, between our outside sales team members where we've rejuvenated compensation plans. We've also created focus in terms of which accounts they call on. And there's a significant effort around what we call up and down the street pro, these are small shops, two-bay, three-bay, four-bay shops that we're catering, are offering to better penetrate. So, that activity is underway. Also, with our CPPs, where we looked at what their compensation plans look like. These are our commercial parts pros inside of our stores and which accounts that they're calling on. So, there's a lot of effort on the pro side and that's augmented by two other things, parts availability and being able to get parts in-market faster. And then, secondly, where and how we allocate drivers in our stores. So we've got a better sort of data oriented way of which stores get how many vehicles to make sure that we're lining up with where the growth is. So, those are a number of the dimensions where we look for growth in pro.

Okay. And then, to go back to the free cash flow discussion, just to understand that correctly, did you provide preliminary outlook for free cash flow in '25? And maybe, if the top line plan or the margin execution comes a little bit weaker than expected next year, what could be another strategy here to protect profitability and protect the cash flow?

Yeah. So, we didn't provide a free cash flow forecast. We just said we expect to fund the CapEx with operating cash flows next year. So, operating cash flow should be able to fund the investments we're making going forward. And do you mind repeating the second question there? We got to follow up on that one.

Just given -- yeah, given the balance sheet here where you still have the debt, right? And clearly, you're not using the proceeds to pay down debt. If the top-line comes in weaker than expected, right, if some of this cost execution does not plan out as expected, can you just help us think through some additional levers to protect cash flow?

Yeah. We have levers within the organization that we'll pull on. Absolutely, we think we've got the liquidity to manage through the downside if there is additional downside to this. We feel like the numbers we're putting out there. If we think about the store closures being 70, 90 basis points going into next year. The work we've already done and started on merchandising excellence programs, we feel pretty confident in our ability to achieve the 2% to 3% next year on a very modest top line, the 50 basis points to 150 basis points when market is going to be low single-digits. So, yes, there's risk. There's levers we can't pull along the way. But from a liquidity standpoint, we feel like our balance sheet is really strong. I wouldn't say that we're not paying down debt. We will plan to pay down debt either at maturity or before maturity as we work and execute this turnaround plan. Our goal is to get to $2.5 billion. So, some of that cash eventually will be used to pay down debt along the way. Shane O’Kelly: Just to add, in terms of managing the business, fewer relevant metrics related to the performance of the business are now being tracked, the review cycle with the leaders around those metrics to create accountability, to create ownership. So, the rhythm of how we're running the company is different and directly related to the things that contribute to the performance numbers we're putting out. So, look for that scrutiny to assist, not just -- I don't think about it in terms of protecting the downside, but in terms of creating the conditions to deliver against what we're saying.

Okay. Thanks for the detail.

Thank you. Our next question comes from Seth Sigman of Barclays. Seth, your line is open. Please go ahead.

Hey, good morning, everyone. I wanted to focus on store closings. Can you just elaborate on what you identified that's different in those stores, in those markets relative to the rest of the go-forward store base? And maybe, also, just the decision to exit certain states? Any more color there? Thank you. Shane O’Kelly: Yeah. Thank you, Seth. I'll start with that question and Ryan can chime in. We had a series of criteria that we put against all of the stores in the network. And by the way, we're geographically agnostic in terms of what stayed open and what closed. And so, there wasn't an eye towards particular entire state exits, that's just what occurred as a result of the analysis. Some of those metrics, store profitability. So, if the store is fundamentally unprofitable, that's a key metric for us. We look at, say, what is the horizon to which we think we can make it profitable or how long has it been unprofitable? Has there been a managerial component? And so, that's -- that was one dimension. Another one is the DC productivity, and this did influence how we thought about the Western markets. So, when you have a DC infrastructure in place to support stores, typically, there's a number of stores that creates the scale for DC operations. And we don't have the density of stores to support that, it ends up impacting the profitability. And what we found with the Western markets is that for us to get to the scale for the DC operations to run where we need them to run, we'd have to infill over a period of years and put a significant amount of CapEx to then get to a baseline level of profitability. And we didn't see that occurring or we didn't think that the use of all of our capital to bring that about and the time horizon to make that happen, was a good use of how we're thinking about the future. So that's how the Western markets came about. Other metrics, we've talked about operations. By the way, lots of other ones, physically, where is the store located? Is it in the real-estate market? How much do we pay in rent? What's the horizon? So, this was a very thorough review, not taken lightly. Obviously, when you're closing a store, both in terms of the permanence of that activity, in terms of the company's ability to garner future revenues, but also the human side. And I don't want to lose sight of that. Any time that you're making these moves and team members now don't get to continue the journey with the company, nobody feels good about that.

Got it. Okay. That's all helpful. If you sort of zoom back, you've laid out a plan today that I think is clearer for the next few years, but still embeds a lot of improvement ahead from all of these initiatives. We're getting the question, you're getting the question in a number of ways, what gives you confidence that this is fixable, that it's not structural? Are there specific data points you can share on the early wins? Maybe how different store cohorts are performing? You started to roll-out some of the hub stores, are there examples there you can give? Or you've had pricing actions? I know there have been a number of early initiatives. Any specific data points you can share to help instill that confidence? Thanks so much. Shane O’Kelly: Yeah. So, you talked about the hub stores. That's certainly one. And as we look at other key metrics where we do things around our store activities and we say, hey, if we move vehicles to stores that have the opportunity for pro growth, how do they do? They get more pro business. If you look at merchandising, we say, hey, if we do a better job around parts availability and we pilot that, how did the sales do? We do better in terms of sales. And if you look at how we're structuring some of our relationships with our vendors, can we -- can we create constructs that deliver better economics. And so, we're seeing those things. But I think the more important picture, if you come up to 50,000 feet is what we're projecting to do are items under management's control. So, these are predominantly cost-related actions, doesn't mean they're necessarily all easy, but these are management controlled items that if we can put good plans in place and focus on executing those, the numbers follow. We have a streamlined supply chain, the numbers follow. If we have availability consistent with what you'd see typically, the numbers follow. So, this isn't predicated on outsized above-market sales growth, for example. And so, the idea that this is under our control doesn't require us to take share. That's what gives me confidence. In particular, as I see the plans that are coming from the different leaders, as I see the leaders in the respective seats, that's where I feel very good about it. Ryan?

Yeah. I'd say the things that we are executing, just in the last few weeks, we've seen store availability pop significantly as we started focusing on the right metrics in there, the warehouse management system now in all of our DCs and the lines per hour improving across all of that. It's -- these metrics are coming in as we continue to focus on these specific metrics. Pricing actions in a -- we've solved for half of that pricing actions already in an environment where the DIY consumer is pressured. And so, we're seeing it here. It's starting to come through. It's going to start to realize over the course of the next year, and we will be sharing these key metrics that we've talked about and the progress of those every single quarter. So, you can get an update on a quarterly basis of these key operational KPIs, and we'll share those every quarter so you can get a feel for how it's going. We understand. Listen, it's -- sounds like we've built a track record of the financial things hitting up, but we are -- these decisive actions we're taking, you're seeing that start to happen. We went from 38 DCs down to 28 DCs. We are taking action. Some of these KPIs are starting to come through.

Great. Thanks so much.

Thank you. Our final question of today comes from Zach Fadem of Wells Fargo. Zach, your line is open. Please go ahead.

Hey, good morning, and thanks for all the details today. So, as you think about the path from sub 1% operating margins today to 2.5% next year and 7% down the road, how would you characterize the '25 and '27 margin expectations if comps were flat rather than up low single-digits? So, said differently, how much of the 2025 and 2027 margin expectation are predicated on higher comps?

Yeah, it's little because we're not expecting to beat the market where -- our assumptions going forward are mainly on what we control and these actions we're taking, not on top line, significant top line growth. So, we are focused on improving time to serve, store availability, our supply chain costs and infrastructure, all these things are things we control. So, the top line is not the driver of this growth and margin expansion. You saw in our walk that sales per store is a big chunk of the gap that we have to our peers and that's not the big part of the driver of this solve. So, if we improve that and that goes, that's just upside potential for us. Now, if you had flat comps, there's a little bit of pressure from inflation, right? 2% to 3% cost inflation that will be there. But for the most part, we're assuming low single-digit over the next three years. Shane O’Kelly: Zach, Shane, thanks for the question. You see the comp expectations we put out, which are pretty modest. The idea that we can grow at-market rates or above market rates, that's the second bite of the apple for where we can improve the bottom-line of the company. What we're depicting for you today are the things that are cost oriented, that management has line of sight to executing against, that plans are in place, and in many cases, activities underway that we've got the metrics involved with, that we have confidence in achieving. When we get those and hit those in stride, that's where I think we have the follow-on discussions on what further OI margin areas can we close the gap with perhaps related more towards the sales side.

Got it. And then, on the $1.2 billion in cash from Worldpac, you've talked about reinvesting a chunk of that. But for the remaining $1 billion or so, can you walk us through just the decision making process around how to deploy the $1 billion? Maybe share some thoughts around the decision not to pay down debt right away? And then, how you think this decision or the decision you make could impact your credit rating one way or the other?

Yeah. So, on the -- we haven't made the full decision yet not to pay down debt. We are managing our liquidity as we go through this restructuring and ensuring that we have the right strength in our balance sheet as we go through it. We are looking at the markets today and making sure when does it make the most financial sense for us to de-lever and pay down some of that debt. So, we are leaving it open right now to pay down debt at maturity or before maturity. But especially, in the early stages of this turnaround and this restructuring, we're leaving that flexibility out there for us. But that doesn't mean that we won't pay down debt before maturity.

Got it. Thanks for the time. Shane O’Kelly: Thanks, Zach.

Thank you. Therefore, this does conclude today's Q&A session. I'd now like to turn the call back over to Shane O'Kelly for any further or closing remarks.

Ladies and gentlemen, thank you for joining us today. Today, we've depicted our future in terms of where we're going over the next three years. We owe gratitude to all the team members on the frontline who work hard every day. We appreciate you taking the time to spend with us to go through each of those actions. We will update you on our journey as it unfolds. We appreciate your questions. Let's go, Advance. Thank you.

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.