Q3 2024 Snap-on Inc Earnings Call
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Speaker Change: I would now like to turn the conference over to Sara <unk>, Vice President Investor Relations. Please go ahead.
Sara: Thank you Gary and good morning, everyone. We appreciate you joining us today as we review snap on third quarter results, which are detailed in our press release issued earlier. This morning, we have on the call Nick Pinchuk Snap ons, Chief Executive Officer, and Aldo Polyarchy Snap ons, Chief Financial Officer, Nick will kick off our call. This morning with his perspective on our performance.
Sara: <unk> Aldo will then provide a more detailed review of our financial results. After Nick provides some closing thoughts we'll take your questions as usual we've provided slides to supplement our discussion. These slides can be accessed under the downloads tab in the webcast viewer as well as on our website <unk> dot com under the investors section these slides will be.
Sara: The archived on our website along with the transcript of today's call any statements made during this call relative to management's expectations estimates or beliefs or that otherwise discussed management's or the company's outlook plans or projections are forward looking statements and actual results may differ materially from those made in such statements additional information.
Speaker Change: Good morning, and welcome to the Snap-On Incorporated 2024-3rd Quarter Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Sara: The factors that could cause our results to differ materially from those in the forward looking statements are contained in our SEC filings. Finally this presentation includes non-GAAP measures of financial performance, which are not meant to be considered in isolation or as a substitute for their GAAP counterparts. Additional information regarding these measures is included in our earnings release issued today.
Speaker Change: After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two.
Speaker Change: Please note, this event is being recorded.
Speaker Change: I would now return the conference over to Sara Verbsky, Vice President and Vesta Relations. Please go ahead.
Sara: <unk>, which can be found on our website with that said I'd now like to turn the call over to Nick Pinchuk, Nick Thanks, Sarah.
Sara Verbsky: Thank you, Gary, and good morning, everyone. We appreciate you joining us today as we review snap-ons third quarter results, which are detailed in our press release issued earlier this morning. We have on the call Nick Pinchuk, snap-ons chief executive officer, and all of the Pagliari snap-ons chief financial officer.
Nick Pinchuk: Good morning, everyone.
Nick Pinchuk: As usual I'll start with the highlights of our third quarter I'll provide my perspectives on our results.
Nick Pinchuk: In our markets.
Nick Pinchuk: I'll pass it hit after that alcohol will give you a detailed review of the financials.
Speaker Change: Nick will kick off our call this morning with his perspective on our performance. Although we'll then provide a more detailed review of our financial results, after Nick provides some closing bags, we'll take your questions.
Nick Pinchuk: My perspective.
Nick Pinchuk: I am encouraged and we believe our third quarter was encouraging another period of broad profitability growth and significant board progress product and process success and clear traction on our tools group pivots have quick paybacks.
Speaker Change: As usual, we provided slides to supplement our discussion. These slides can be accessed under the Download tab and the Web Cast viewer, as well as on our website, tap on dot com under the In-Buster section.
Nick Pinchuk: Of course.
Nick Pinchuk: The corner again had its challenges ongoing macro pressures pressures, creating obstacles have been certainly just like we've encountered before but in the end.
Speaker Change: The slides will be archived on our website along with the transcript of today's call. Any statements may join this call relative to Management's expectations, estimates or beliefs.
Nick Pinchuk: We adjusted which stood the turbulence took advantage of the opportunities and drove another strong earnings performance and all of that it's written clearly across the results here.
Speaker Change: or that otherwise discussed management or the company's outlook, plans or projections are forward looking statements, and actual results may differ materially from those made in such statements.
Nick Pinchuk: Here they are.
Speaker Change: Additional information and the factors that could cause our results to differ materially from those in the forward-looking statements are contained in our SCP filings.
Nick Pinchuk: Third quarter sales of 1.147 billion was slightly down from the 1 billion $159 3 million recorded last year on an organic basis, excluding 200000, and unfavorable foreign currency translation and $7 2 million from acquisitions.
Speaker Change: Finally, this presentation includes non-get measures of financial performance, which are not meant to be considered in isolation or as a substitute for their gap counterparts.
Nick Pinchuk: Our organic sales were lower by one 7%, but the Opco operating income was up and the Oi margin was 22% up 80 basis points setting a new benchmark for our third quarters.
Sara Verbsky: Additional Information regarding these measures is included in our earnings release issue today, which can be found on our website. With that said, I'd now like to turn the call over to Nick Pinchuk. Nick? Thanks, Sara.
For financial services, the O I grew to $71 7 million that's up from the.
Nick Pinchuk: War in everyone.
Nick Pinchuk: As usual, I'll start with the highlights of our third quarter. I'll provide my perspective on the results.
Nick Pinchuk: $69 4 million worth of 2023, a number that when combined with our uncle result raised our consolidated Oi margin to 26%.
Nick Pinchuk: Markets our path ahead. After that, I will give you a detailed review of the financials.
Nick Pinchuk: Up 90 basis points from last year's 25.1 and EPS.
Nick Pinchuk: My perspective.
Nick Pinchuk: I am encouraged.
Nick Pinchuk: and we believe our third quarter was encouraging another period of broad, proper, ability, growth and significant forward progress. Product and process success and clear traction on our tools group pivot to quick paybacks.
Nick Pinchuk: Was $4 77.
Nick Pinchuk: A nice gain from last year's $4 51.
Nick Pinchuk: So those are the overall results marked by operating capability structural balance and consistent resilient prevailing against significant headwinds.
Nick Pinchuk: Of course, the court again had its challenges on going macro pressures, creating obstacles of uncertainty, just like we've encountered before, but in the end.
Nick Pinchuk: Now, let's take a view of the market.
Nick Pinchuk: During the third quarter automotive repair remained robust at continuing to expand and complexity new models into the market unveiling a rollout of new Drivetrains motor configuration and high Tech electrical systems that control a neural network of sensors woven together that enabled driver assistance vehicle autonomy.
Nick Pinchuk: We had justed with still the turbulence, took advantage of the opportunity and drove another strong earnings performance, and all of that is written clearly across the results.
Nick Pinchuk: is the R.
Nick Pinchuk: 3rd quarter sales of 1 billion 147 million were slightly down from the 1 billion 159.3 million recorded last year. On our organic basis, it's including 200,000 and unfavorable foreign currency translation and 7.2 million for acquisitions.
Nick Pinchuk: All of it has been in modern chassis expansions out of the space age materials and it's complicated sophisticated advancement combines with an aging car park and now we have just 12 six years to make fixing vehicles, even more challenging.
Nick Pinchuk: are organic sales were lowered by 1.7% but the optical operating income was up and the OI margin was 22% up 80 basis points setting a new benchmark for our third quarters.
Nick Pinchuk: From snap on.
Nick Pinchuk: This is music to your ears, and the hits just keep on common creating opportunities for years to come.
Let's talk about organization the OEM dealerships the independent garages. The segment that primarily focuses on infrastructure type investments recover things like renovating beige and upgrading repair equipment, meaning the challenges of new vehicle models and expanding shop capacities to match the ryzen repair work.
Nick Pinchuk: for financial services, the OI through the 71.7 million, and that's up to 60 from the 69.4 million over 2023. A number that, when combined with our optical result, raise our consolidated OI margin to 26%.
Nick Pinchuk: Up 90 basis points from the last year's 25.1 NEPS
Nick Pinchuk: Driven by the ongoing increase in vehicle complexity.
Nick Pinchuk: It was $4.7.
Nick Pinchuk: New lifts to support the extra weight of battery systems sophisticated under car equipment to calibrate the driver assist systems that enabled vehicle automation.
Nick Pinchuk: A night's game for last year's 4th I was at 51 cents.
Nick Pinchuk: So those are the overall results, marked by operating capability, structural balance, and consistent resilience, prevailing against significant heads.
Nick Pinchuk: And more powerful software suite for managing parts room service bays and customer interfaces enhanced vehicle communication devices to interact with the more complex designs and more powerful repair information database to read to diagnose and to fix the vehicles of the now and the future.
Nick Pinchuk: Now let's take a view of the market.
Nick Pinchuk: and third quarter automotive repair remained robust. It continued to expand and complexity. New model centers the market, unveiling a rule out of new drive trains, motor configurations, and high tech elective assistance that control the neural network of sensors, woven together that enabled driver assistance vehicle autonomy.
Nick Pinchuk: Our repair information group Berard Tonight thrives in this world of complexity, serving repair shop owners and managers delivering solutions that make the full repair pet much easier paving the way forward with innovative dealership management systems proprietary one of a kind intelligent diagnostics platforms and a full array of alright.
Nick Pinchuk: All of it housed in modern chassis, fashions out of space-age materials. And it's complicated sophisticated advancements combined with an aging car park. You know what now we have just 12.6 years to make fixing vehicles even more challenging.
Nick Pinchuk: Capable shop equipment.
Nick Pinchuk: If you're from Snapper, you're from Snapper.
Nick Pinchuk: Now the opportunities for the garage is a strong but uncertain interest rates rumors of tax changes and worries over the elections are all weighing on investment decisions.
Nick Pinchuk: This is music to your ears, and it hits just keep on commenting, creating opportunities for years to come.
Nick Pinchuk: Let's talk about our organization.
Nick Pinchuk: The OEM, the dealerships, the independent garage, the segments that primarily focus is on infrastructure of type investments.
Nick Pinchuk: Mixed landscape across the market, but the overall outlook still remains quite positive and we believe that snap on an art and I are poised to participate fully in the abundant opportunities that was supposed to.
Nick Pinchuk: Recover, you know, things like renovating bays and upgrading repair equipment, meeting the challenges of new vehicle models and expanding shop capacities to match the rise of repair work, driven by the ongoing increase in vehicle complexity.
Nick Pinchuk: The technician market.
Nick Pinchuk: These are the folks who.
Nick Pinchuk: The size of the data touch the screen diagnose the promise portal, the rather than wielder extraordinary skills to execute the repair, it's where our men network closet Street.
Nick Pinchuk: New List to support the extra weight of battery systems. So just get it under car equipment to calibrate the driver's system that enables vehicle automation.
Nick Pinchuk: So in that regard the third quarter is always a great time for me because it's when we hold our annual snap on franchisee conference or SFC, if a gathering of our men and women, who drive the vans and call out of hundreds of thousands of pecs.
Nick Pinchuk: and more powerful software Swedish, for managing parts from service space and customer interfaces and hands vehicle communication devices to interact with the more complex design, and more powerful repair information database to read to diagnose and to fix the vehicles of the map and of the future.
Nick Pinchuk: Every week.
Nick Pinchuk: It's an unmatched connection to the world of vehicle repair.
Now again this year I had extensive.
Nick Pinchuk: Our parents from Asian Group are tonight, tribes in this world, the complexity.
Nick Pinchuk: Conversations with dozens and dozens of our franchisees and each encounter each encounter resonated with enthusiasm, we say snap on prevails and turbulence in proceeds with Congress and the franchisees no it's true.
Nick Pinchuk: Survey Repair shop owners and managers delivering solutions that make the full repair path much easier, paving the way forward with innovative dealership management systems, proprietary one of a kind intelligence diagnosis platforms, and a full array of capable shop equipment.
Nick Pinchuk: Now with that said the microbiome environment, it's still weighing on our technician technician customers with considerable uncertainty driven by the election and its perceived impact the fears of ongoing labor inflation inflation by border pressure and by the the specter of prolonged wars.
Nick Pinchuk: Now the opportunities for the graduates is strong.
Nick Pinchuk: but uncertain interest rates, rumors of tax changes, and worries over the elections are all weighing on investment decisions. Creating a mixed-lamb scrape across the market, but the overall outlook still remains quite positive. And we believe that snap on an R10i are poised to participate fully in the abundant opportunity.
Nick Pinchuk: The shops are full tech wages are up the hours are expanding and the demand for <unk> continues they have cash.
Nick Pinchuk: Now let's see to uh...
Nick Pinchuk: But theres still confidence poor the bad news is they get everyday for breakfast is weighing on them.
Nick Pinchuk: the Technician Market.
Nick Pinchuk: is the fox soup.
Nick Pinchuk: Right now, they're hesitant on the future and as such the reluctant are big ticket items with longer paybacks sort of a comedy the tools group continues to pivot focusing on shorter payback items to match the technician's current preferences and the third quarter results confirm that it's working.
Nick Pinchuk: the Cypher, the data, touch the screen, diagnose the promise, pour all the wrenters and wheeled or extraordinary skills to execute the repair. It's where a man network flies at strades.
Nick Pinchuk: You know, in that regard, the third quarter is always a great time for me because just when we hold our annual snap on it, franchisee competency or SFC, it's a gathering of men and women who drive the van and call on hundreds of thousands of pecks.
Nick Pinchuk: So we believe the automotive repair market is robust.
Nick Pinchuk: Current on current uncertainty notwithstanding it's a great place to operate.
Nick Pinchuk: Every week.
Nick Pinchuk: Now, let's turn to the critical industries, where the penalty for failure is high this is where our commercial and industrial group.
Nick Pinchuk: It's an unmatched connection to the world of vehicle repair.
Nick Pinchuk: You know, again this year I had extended conversations with dozens and dozens of our franchisees and each encounter, each encounter resonated with enthusiasm. We say, snap on for fails and turbulence and proceeds with confidence and the franchisees know it's true.
Nick Pinchuk: Group or our C&I makes its living it's challenging.
Nick Pinchuk: Oregon environments, like oil and gas platforms mining sites and battlefield, but it also includes sensitive and sophisticated atmospheres needed a manufacturer of computer chips to build airplanes and to launch rockets the customers in this segment.
Nick Pinchuk: In this segment of organizations big and small.
Nick Pinchuk: Now, with that said, the microbiome environment is still weighing on our technician customers, with considerable uncertainty driven by the election and it's perceived impact. The fear is of ongoing inflation, inflation by border pressure, and by the specter of prolonged wars.
Nick Pinchuk: And there are more influenced by the data then the text interest rates GDP and industry demands and as such these segments are pretty positive.
Nick Pinchuk: And we see it in the results growth in aviation and defense and general industries and sectors that need our precision towards device to execute and document accuracy and the areas and enabled by our custom kit packages that meet the specific needs of the tests that improve quality productivity and safety in other words solutions that are right up our rally.
Nick Pinchuk: The shots are full, tech wages are up, the hours are expanding, and the demand for tech continues. They have cash.
Nick Pinchuk: but they're still confidence poor. The bad news they get every day for breakfast is weighing in on them.
Nick Pinchuk: This is also the segment, where our largest international presence.
Nick Pinchuk: Right now, there is a hesitant on the future and as such, that we looked at a big ticket items with longer prey paybacks. So, to a comedy, the tools group continues to pivot, focusing on shorter payback items to match the technicians current preferences, and the third quarter results can firm that it's working.
Nick Pinchuk: Presences and consequently, it's good.
Nick Pinchuk: Segment with the headwinds of the geopolitical turbulence in that regard Europe continues to vary region by region, the south remains positive.
But several countries, particularly in the north of dealing with difficulty in some cases technical recessions.
Nick Pinchuk: So we believe the automotive repair market is robust.
Nick Pinchuk: And in Asia, It's also mix mixed China still recovering from the pandemic and the effects of the extended Lockdowns at the same time Korea, and Japan are resilient.
Nick Pinchuk: Kerenon's certainty now is standing. It's a great place to upgrade.
Nick Pinchuk: Now, let's turn to the critical industries, with a palpy for failure to tie. This is where our commercial industrial group, or our CNI, makes its living. It's challenging.
Speaker Change: William So there are geographical geographic challenges in the critical industries, but overall.
Speaker Change: This market is positive the potential is considerable and we believe we are well positioned to capitalize on these possibilities.
Nick Pinchuk: Oregon environments like oil and gas platforms, mining sites and battlefields, but it also includes sensitive and sophisticated atmospheres needed to manufacture computer chips to build their plank and to launch rockets. The customers in this segment in this segment are organizations big and small.
Speaker Change: Well those are the markets.
Speaker Change: Now, let's automobiles or tomorrow, or something or the automotive repair it's mixed in it and then now but broad potential for the future in the critical industries are still robust and rich with opportunities now lets talk about the operating groups in C&I.
Nick Pinchuk: and they're more influenced by the data than the text, interest rates, GDP, and industry demands. And as such, these segments are of pretty positive.
Speaker Change: Sales of $365 7 million compared to $366 4 million registered last year sales, excluding $7 3 million of acquisition related volume.
Nick Pinchuk: and we see it in the results, growth and aviation in defense, in general industries and sectors that need our precision towards the life.
Nick Pinchuk: The Execute and Document Acrosy, and the areas enabled by our custom kits, packages that meet the specific needs of the tasks that improve quality productivity and safety, in other words, solutions that are right up our alleys.
Speaker Change: Excluding the some point 2 million of acquisition related volume the organic sales were down by two 1%.
Speaker Change: From an earnings perspective, however, C&I Oi of 61 million improved by $2 9 million or 5% over last year and the Oi margin was 16, 7% up 80 basis points expanding it.
Nick Pinchuk: This is also the segment where our largest international president is, and consequently, if you segment with the headwinds of a geopolitical turbulence, and having our Europe continues to vary region by region, the South Man's positive.
Speaker Change: Equaling the record high established in the last quarter.
Speaker Change: The major.
Nick Pinchuk: But several countries, particularly in a north, are dealing with difficulty in some cases technical recessions.
Speaker Change: <unk> major contributor was our industrial division, continuing its upward trajectory and strong profitability wielding the capacity.
Nick Pinchuk: and in Asia, it's also mixed. China is still recovering from the pandemic and the effects of the extended lockdown. At the same time, Korea and Japan are resilient. A resilient, so there are geographic challenges in the critical industries, but overall.
Speaker Change: Provided by its new Kitting center in Kenosha, and meeting the rising demand for customized solutions along the way in addition to our investments in the kidney Center. Our acquisition amounts last year is rolling into its 12 months and it's been value. It's been a valuable contributor to meeting the needs of our customers for small precision torque.
Nick Pinchuk: This market is positive, but Pinchuk is considerable, and we believe we are well positioned to capitalize on these possibilities.
Speaker Change: Pork continues to be to rise in significance with critical industries customers do with critical industry customers and to meet this need we packaged our existing medium and heavy duty towards products with mountains mounts mouses lighter offerings, giving us a wide spectrum of clamping force as the white speck.
Nick Pinchuk: Hold those in the market.
Nick Pinchuk: Now, let's... those are remarks, art of art of art, some of the automotive repairs mixed in the now but broad potential for the future. And the critical industry are still robust and rich with opportunities. Now, let's talk about the operating groups and see an eye.
Speaker Change: From a planting courses that are essential to the critical interest from oil and gas the aviation defense, we're capitalizing on that opportunity in the quarter showed at our.
Nick Pinchuk: Sales at 365.7 million compared to 36.4 million registered last year.
Nick Pinchuk: Sales excluding 7.3 million of acquisition-related volume, you know, excluding the 2 million of acquisition-related volume, the organic sales were down by 2.1%.
Speaker Change: Our specialty torque business rose significantly both in volume and in profitability. We also continued adding to our portfolio our portfolio of professional cordless tools engineered products are aligned with the the work performed and expectations with Texas doing repairs.
Nick Pinchuk: From an earnings per second, however, C&I-061 million approved by 2.9 million or 5% over last year. And the OY margin was 16.7% of the 80-based points expanding to the equalling the record high established in the last quarter.
For the serious people of work.
Speaker Change: New products can add great value.
Speaker Change: And our quarter was marked by that effect for <unk>.
Speaker Change: Working on large equipment over and over the road trucks, we unveiled at <unk> 90, 175, three quarter inch 18 volt impact not for the faint apart. This unit delivers 1550 foot pounds of bolt breakaway torque.
Nick Pinchuk: The Major.
Nick Pinchuk: Contributors' work, the major contributor, was our industrial division, continuing its upper trajectory and strong profitability, wielding the capacity provided by its new Chitting Center in Panocia and meeting and rising demand for customized solutions along the way.
Speaker Change: Ideal for the most challenging jobs the rugged the rugged lightweight housing shakes up hard harsh environments. The ergonomic design reduces stress and fatigue pretty pretty important winter wheel, then 1550 foot pounds.
Nick Pinchuk: and Editions to Our Investments in the Kidding Center.
Nick Pinchuk: Our acquisition on Mount Flesh, years rolling into its 12th month and it's been valuable. It's been a valuable contributor meeting the need for our customers for small precision torque.
Speaker Change: And the 91 so in the end. It's 90 175 Monster is a great feature set the book at like led spotlights multiple power settings in a variety in a variable speed trigger to just apply the right torque to the job. It's a great tool just what you'd expect from snap on powerful and application easy to.
Nick Pinchuk: Torque continues to be to rise in significance with critical industries, customer ed, and with critical industry customers, and to meet this need.
Nick Pinchuk: We packaged our existing medium and heavy duty tort products with mouse, mouse, mouse's, later law frames. Giving us a wide spectrum of clamping forces, the wide spectrum of clamping forces that are essential to the critical industry for oil and gas, the aviation, to defense, or capitalizing on that opportunity, and the quarters showed it.
Use and very efficient, it's a tool that tech's increasingly want in their arsenal when they're when they're fighting the toughest jobs. The 90 175. It is a great productivity enhancer.
Nick Pinchuk: Our Special Retort Business rolls significantly both in volume and in profitability. We also continued adding to our portfolio for a portfolio of professional cordless tools. Engineer products aligned with the work performed and expectations of the text during repairs.
Speaker Change: Technicians have noticed.
Speaker Change: One last thought.
Speaker Change: About the results.
Speaker Change: C&I kept investing in the quarter, maintaining and expanding our advantage in products brands and in people operating expenses were 140 basis points of sales higher than last year.
Nick Pinchuk: you know, for the serious people of work.
Nick Pinchuk: New products can add great value.
Nick Pinchuk: and our quarter was marked by that effect.
Speaker Change: But with the benefits of rapid continuous improvement or RCI, the value of new plant and the value of the new products gross margins rose by 220 basis points and the Oi margin. Despite the spending was up 80 basis points higher spending and higher profits without additional scale.
Nick Pinchuk: for working on large equipment and over the road trucks we unveiled a C-T-9175-3-quarter-inch 18-volt impact, not for the faint of heart. This unit delivers 1,555-foot-pounds of bolt breakaway torque.
Nick Pinchuk: is ideal for the most challenging jobs. The rugged, the rugged light weight housing shakes up harsh environments. The ergonomic design reduces stress and fatigue. Pretty, pretty important when you're wheeled in 1,550 footbounds.
<unk>.
Speaker Change: Okay.
Speaker Change: That C&I.
Speaker Change: Innovative products Huston solutions precision instruments, all combined to reach customers in critical industries and extend the snap on brand out of the garage with momentum and.
Nick Pinchuk: and the 91st, and this 91st 75 monster is a great feature set to boot at LED spotlights, multiple power settings and a variable speed trigger to just apply the right torque to the job.
Speaker Change: And profitability.
Speaker Change: Now for the tools group sales in the third quarter of $500 5 million included an organic decrease of three 1% with a U S decrease that was not much different.
Speaker Change: It's a great tool. Just what you expect from snap on. Powerful application, easy to use, and very efficient. It's a tool that texts increasingly want in their arsenal when they're fighting the toughest jobs. The 91 75. It's a great productivity enhancer.
Speaker Change: Margin in the period was 21, 6% down 40 basis points from last year due to the lower volume with that said gross margins remained strong improving 100 basis points, driven by new products RCI and manufacturing efficiencies that was quite a feat.
Speaker Change: <unk>.
Speaker Change: and the technicians have noticed.
Speaker Change: And during the period during the period our team maintained its focus on product development designing solutions that make work easier provide customers with a quick payback and that pivot is taking hold closing the deficit. Both overall in the U S to less than half of it was in the second quarter.
Speaker Change: One last thought about the results.
Speaker Change: C. and I kept investing in the quarter, maintaining and expanding our advantage of product, brand and people. Operating expenses were 140 basis points of sales higher than last year.
Speaker Change: And that trends reinforcement appears bike sales being $18 $5 million higher than the second quarter.
Speaker Change: But with the benefits of rapid continuous improvement or RCI
Speaker Change: With summer vacation and FSC FSC SFC brakes, we haven't seen the tools group up sequentially in the third quarter for some time, we believe it's a science considerable momentum.
Speaker Change: The tools groups coming back.
Speaker Change: much
Speaker Change: Bethany and I.
Speaker Change: Beyond the numbers, we held our annual SFC in August this year in Orlando with attendance, reaching 9000 franchisees guests and SAP on associates with tools show spanned over three football fields showcasing the latest product innovation more than 4500 Skus strong. The weekend also was packed with training sessions.
Speaker Change: Innovative Products, Huston Solutions, Precision Instruments, All Combined to reach customers in critical industries and extend the snap-on brand out of the garage with momentum.
Speaker Change: and Prophet Ability.
Speaker Change: Now for the tourist group. Sales in the third quarter of $500.5 million included an organic decrease of 3.1% with a US decrease that was not much different. The OI margin in the period was 21.6% down 40 basis points from the last year due to the lower volume. With that said, gross margins remain strong, improving 100 basis points driven by new product, RCI and manufacturing efficiency, that was quite a feat, actually.
Speaker Change: Purposely designed to grow each fans business and expand the franchisees already substantial product knowledge among those seminars with an in depth review of our intelligent diagnostic portfolio with instructors connected directly to the vehicles communicating with the cards in real time.
Speaker Change: And clearly demonstrating our industry leading advantage it attracted a lot of attention.
Speaker Change: And during the period, our team maintained its focus on product development, designing solutions that make more easier to provide customers with quick payback, and that pivot is taking hold, closing the deficit both overall and the US to less than half it was in the second quarter.
Speaker Change: And we celebrated Saturday night by transporting the intact transporting the entire crew and what could be described as an armada of buses to seaworld for Knight of roller coasters aquatic chosen a lot of fun.
Speaker Change: It was another mineral of that event, but principally it's serves as a testament to the unique bond that our franchisees hold with a snap on team I believe anyone attending would affirm that the franchisees left reassured on the power of operation.
Speaker Change: and that trend is reinforcing appears by sales being $18.5 million higher than the second quarter. With summer vacation and FSC, FSC, FSC breaks, we haven't seen the tools group up sequentially in a third quarter for some time. We believe it's a science-conservable momentum.
Speaker Change: Enthusiastic about the way forward with our enterprise and convinced that snap on really does prevail and difficulty and proceed with confidence.
Speaker Change: It's all sorts of rules coming back.
Speaker Change: The product groups that this year's event, where we're pretty busy we're busy, especially near the cartwheel cartwheel to Heaven. It was it was an eye catching and colorful wall of mobile to two cards.
Speaker Change: Beyond The Numbers.
Speaker Change: We held our annual left-of-c in August this year in Orlando with the attendance reaching 9,000 franchises, guests and staff on associates. The tool show spanned over three football fields, showcasing the latest and product innovation, more than 4,500 SKU strong.
Speaker Change: The model that stole the show was our brand new payer Etsy to 424, 60 flipped up Walcott our unit that offer snap on tool storage and a quick payback form just what Texas one in today's world. That's why it was all part of the 24 60 can hold a significant breadth of sockets wrenches in power tools and a variety of draws that range from two inch to.
Speaker Change: and also was packed with training sessions, purposefully designed to grow each fan's business and expand the franchise, these already substantial product knowledge. Among those seminars was an in-depth review of our Intelligence Diagnostic Portfolio, with the instructors connected directly to the vehicles, communicating with the cars in real time.
Speaker Change: <unk> five inch configurations, and the ultra ultra deep top compartment is designed with five AC outlets and two USB ports to ensure that electrical devices are charged and at the ready for any use at any time. The launch was a significant success and it provides even more testimony that the tools group traction is to pivoting and pivoting to shorter.
Speaker Change: and clearly demonstrating our industry-leading advantage, it attracted a loss of attention.
Speaker Change: and we celebrated Saturday night by transporting the entire crew and what could be described as an amount of buses to see world for a night of rollercoasters to aquatic shores in a lot of fun. You know, it was another memorable event.
Back to items is working.
Speaker Change: Also on the shop floor, where products are highlighting snap on customer connection you know we stand next to mechanics, observing we're experiencing the complexity of vehicle repair and we use those insights gained and design innovations that make work easier one such custom solution available at the SFC.
Speaker Change: is a test to the unique bond that our franchisees hold with the snap on team. I believe anyone attending would affirm that the franchisees left reassured on the power of operation.
Speaker Change: enthusiastic about the way forward with our enterprise and convinced that Snap-On really does prevail in difficulty and proceed with confidence.
Speaker Change: It was our new F 8400, a quarter half inch drive have been to drive the actual spindle not soccer that's a mouthful.
Speaker Change: It's manufactured right here in the USA, our Altamonte, Alabama plant.
Speaker Change: The product booths at this year was a vent where we're pretty busy, we're busy, especially near the Cartway to heaven. It was an eye catching and colorful wall, a mobile tool carts.
Speaker Change: Since 19 2022 G. M 3500 heavy duty pickups have you have used a unique fastener, that's very deep into the axle inside the actual pub.
Speaker Change: The model that stole the show was our brand new care at the...
It's a very difficult and time consuming.
Speaker Change: 2464 60 flip top rule card, a unit that offers Snap-On tool storage in a quick payback form, just what Texan won in today's world. That's why it was so popular. The 2460 can hold a significant breath of sockets, wrenches, and power tools in a variety of drawers that range from two inch to three inch to five inch configurations. And the ultra deep top compartment is designed with five AC outlets and two USB ports to ensure that electrical devices are charged and at the ready for any use at any time. The launch was a significant success and it provides even more testimony that the tools group traction is to pivoting to shorter payback items.
Speaker Change: Operation to extractive with standard tooling, so our new specially designed sockets reaches in links precisely with the embedded fastener and it makes the removal or installation safe quick and effortless each vehicle is.
Speaker Change: Weak.
In a range of different repairs are needed as they age.
This is the mother lode for a toolmaker and snap on customer connection positions. Our teams have just the device to match the pet. It's a great advantage that was on display at the SFC.
Speaker Change: And it was on display.
Speaker Change: Our third quarter results the tools group pivoting to quick paybacks, launching differentiating new products and summoning the resilient so many resilience against the headwinds.
Speaker Change: is working.
Speaker Change: Also on the shop floor, we're products, high-learning, snap-on, customer connection, you know, we stand next to mechanic, observing or experiencing the complexity of vehicle repair And we use those insights gain and design innovations that make work easier, one such customer solution available at the end of the day
Speaker Change: Now for our F&I sales of $422 7 million in the third quarter represented an organic decline of one 9% lower sales on under car equipment and reduced activity with OEM dealerships were partially offset by higher sales in diagnostics and information products to independent shops for independent shops.
Speaker Change: was our new S-8400 Corps, half-inch, and strives, half-inch, drive the axle spindle nut socket. That's a mouthful. It's manufactured right here in the USA or Elfman, Alabama plant. Since 1922, GM-3500 heavy duty pickups have used a unique fashiner that's very deep into the axle, inside the axle-hud pub.
Speaker Change: Perfect.
Speaker Change: Declines in hardware.
Speaker Change: <unk> by gains in software.
Speaker Change: <unk> was 170, $107 3 million up two 3% compared to last year, despite the lower sales and the Oi margin of 25, 4%.
Speaker Change: One of the group's highest for some time was up 110 basis points from 2023 bottle.
Speaker Change: You know, it's a very difficult time consuming.
Speaker Change: Operation to extract it with standard tooling. So our new, specially designed socket, reaches in, links precisely with the embedded vascular and it makes the removal and installation safe, quick and effortless. You know, each vehicle is unique.
Speaker Change: All of it was authored by by Big product in RCI, driven great gains in gross Archie or different game gains in gross margins.
Speaker Change: Partially offset by spending and operating expenses gross margins up operating expenses balancing some of it.
Speaker Change: and a range of different repairs are needed as they age.
Speaker Change: This is the mother load for a toolmaker and snap on customer connection positions our team have just the device to match the path. It's a great advantage that was on display at the SFC and it was on display in our third quarter results.
Speaker Change: But it was all in investment was there to maintain and extend our advantages and so we did during the quarter Arts and I launched its latest edition to our intelligent diagnostic lineup the Apollo plus.
Speaker Change: This is a new ergonomically designed handheld it offers a two second buda the fastest in the industry and a large tenant screening a touch screen for improved visibility and navigation. Most importantly, the platform is powered by our proprietary intelligent diagnostics software would almost 3 billion data records in over 400 billion unique diagnostic a bit or.
Speaker Change: The tools group, pivoting to quick paybacks, launching, differentiating new products, and summoning the resilience of the headwinds.
Speaker Change: Now, for our tonight, sales of the 422.7 million, there's called a represented organic decline of 1.9 percent. Lower sales are under car equipment, and reduced activity with OEM dealerships and partially offset by higher sales and diagnostics and information products to independent shops for independent shops. In effect.
Speaker Change: Organized to help the technicians diagnose and fix vehicles much faster.
Speaker Change: It was introduced in mid August towards the end of the quarter and it represents a text most economical way to wield the power of intelligent diagnostics and.
Speaker Change: The climb is in hardware.
Speaker Change: Balanced by Gaines and Software.
Speaker Change: It already has the customers are.
Speaker Change: O.I. for RR tonight was 170, 107.3 million, up 2.3% compared to last year despite the lower sales. And the O.A. margin of 25.4% one of the group's highest for some time was up 110 basis points from 2023.
Speaker Change: Or on the Street feedback says the new sophisticated platform with a quick payback is a real hit.
Speaker Change: And we believe has a great future. We're encouraged by the strength of our handheld diagnostics and the other unique solutions, we provide and that confidence is reinforced by outside experts our solus handheld with eligible for 2024.
Speaker Change: All of it was authored by a big product and RC Outroving Drake Games in Grossmargers.
Speaker Change: For the 2024 awards and it was cited by Motor magazine as one of the top of the 2024 top 20 tools and it was also recognized by power tools and equipment news or P. 10, four for one of its as one of the 2020 for People's Choice Award that's a distinction based on the endorsement.
Speaker Change: Partially offset by spending and operating expenses. Gross margins up, operating expenses balance in some of it.
Speaker Change: But it was all, and the investment was there to maintain and extend our advantages. And so we did. During the quarter-arts and I launched its latest edition sort of intelligence diagnostic lineup, the Apollo Plus.
Speaker Change: From a real technician actual users for all across the nation. Arthur I also received P 10 recognitions towards collision repair package, it's on break.
Speaker Change: This is a new ergonomically signed handheld. It offers a two-second boot-up, the fastest in the industry, and a large ten-inch screen, a touchscreen for improved visibility and navigation. Most importantly, the platform is powered by our proprietary television diagnostic software. With almost 3 billion data records and over 400 billion unique, diagnostic events all organized to help technicians diagnose and fix vehicles much faster.
Speaker Change: It's on truck brake weighs heavy duty diagnostic software and its M. One Mitchell one shop management system collectively this year across all of our operations snap on 120, such awards product is snap on is a snap on advantage.
Speaker Change: And everybody knows it.
Speaker Change: We're confident in the strength of ours, and I and we'll keep driving to expand its position with repair shop owners and managers, making work easier the base more productive and providing the garages with a means to match the ever growing challenges of modern vehicle repair.
Speaker Change: was introduced in Middle August toward the end of the quarter, and it represents a text most economical way to wield the power of intelligent diagnostics and...
Speaker Change: It almost the old ready has the customer's attention Our on the street feedback says the new service to get a platform where the quick payback is a real hit and we believe it has a great
Speaker Change: Well those of the third quarter results.
Speaker Change: Group demonstrating.
Speaker Change: Demonstrating improvements sequentially pivoting effectively to meet customer preferences, C&I and ours going on innovative new products and operating efficiencies managing the headwinds producing benchmark Oi margins and for the overall Corporation.
Speaker Change: We're encouraged by the strength of our handheld diagnostics and the other unique solutions we provide. And that confidence is reinforced by outside experts.
Speaker Change: Our Solar Hands-out was eligible for 2024.
Speaker Change: for the 2024 Awards, and it was cited by Motor Magazine as one of the top of the 2024 Top 22. And it was also recognized by Power Tools and Equipment News.
Speaker Change: Sales organically down one, 7%, but <unk> up two 9% alcohol Oi margin of 22% up 80 basis points and EPS $4 70 up four 2% rising over every comparison all.
Speaker Change: and our P10 for one of its, uh...
Speaker Change: As one of the 2024 People's Choice Award, that's a distinction based on the endorsements from real technicians.
Speaker Change: Achieved against doing.
Speaker Change: It was another encouraging quarter.
Speaker Change: Action will use this from all across the nation. Our supply also received P-10 recognition for its collision repair package. It's on brake lake. It's on truck brake lake. It's heavy-duty diagnostic software. And it's M1, M21, shop management system. Collectively this year, across all our operations, step-on-one, 20 such awards. Product is, step-on is a snap-on advantage.
Allo: Now I'll turn the call over to Allo allo. Thanks, Nick our consolidated operating results are summarized on slide six net sales of $1 billion $147 million in the quarter compared to 1 billion $159 3 million last year, reflecting a one 7% organic sales decline and $300000 of unfavorable foreign currency translation, partially offset.
Allo: But $7 $2 million of acquisition related sales. Despite the ongoing uncertainties of the current environment overall sales activity in the quarter can be characterized as stable.
Speaker Change: and everybody knows it.
Speaker Change: to
Speaker Change: We're confident in the strength of RSI and we'll keep driving to expand its position with parachute owners and managers, making work easier. The base more productive and providing the garages with the means to match the ever-growing challenge of modern vehicle repair.
Allo: While our franchise vantage channel revenues continue to be tempered by physician confidence the tools group generated higher sales sequentially versus last quarter generally the third quarter reflects lower sales dollar activity as compared to the second quarter.
Speaker Change: Well, those are not those coordinates out.
Speaker Change: Toot-ot!
Speaker Change: Demonstrating Improvements, eventually, pivoting effectively to meet customer preferences, CNI and R-29, innovative new products, and operating efficiencies, managing the headwinds, producing benchmark OYM margins, and for the overall corporations.
Allo: Gross margin improved 130 basis points to 51, 2% from 49, 9% last year, reflecting increased sales and higher gross margin businesses benefits from the company's RCI initiatives and lower material and other costs operating expenses as a percentage of net sales rose 50 basis points to 29, 2% from $28.
Speaker Change: Sales organically down 1.7% but I'll go all the way up to 0.9%. I'll go all the way margin to 22% up 80 basis points and EPS $470 that sends up 4.2% Rising over every comparison of all achieved against the wind.
Allo: <unk> percent in 2023, primarily due to the lower sales volumes.
Allo: Operating earnings before financial services of $252 $4 million in the quarter compared to $245 $2 million in 2023 as a percentage of net sales operating margin before financial services of 22% represented an improvement of 80 basis points from the 21, 2% reported last year.
Speaker Change: It wasn't another.
Speaker Change: and Peraging Corps.
Aldo: Now, turn the call over to Aldo, Aldo, thanks Nick, our consolidated operating results are summarized on slide 6, that sales of $1,147 million in the quarter compared to $1,159.3 million last year.
Allo: Financial services revenues of $104 million in the third quarter of 2024 compared to $94 $9 million last year, while operating earnings of $71 7 million compared to $69 4 million in 2023 consolidated operating earnings of $324 1 million compared to $314 six.
Aldo: You're collecting a 1.7% organic sales decline and $300,000 of unfavorable foreign currency translation.
Aldo: Partly offset by $7.2 million of acquisition related sales. Despite the ongoing uncertainties of the curtain environment, overall sales activity in the quarter can be characterized as stable. And while our franchise van channel revenues continue to be tempered by technician confidence, the tools group generated higher sales sequentially versus last quarter.
Allo: And last year as a percentage of revenues the operating earnings margin increased 90 basis points to 26% from 25, 1% in 2023, our third quarter effective income tax rate of 22, 9% compared to 22, 6% last year.
Aldo: Generally, the third quarter reflects lower sales dollar activity as compared to the second quarter.
Allo: Net earnings of $251 1 million compared to $243 $1 million in 2023, and net earnings per diluted share of $4.70 in the quarter compared to $4 51 per diluted share last year, an increase of four 2%.
Aldo: Consolidated gross margin improved 130 basis points, the 51.2% from 49.9% last year, reflecting increased sales and higher gross margin businesses, benefits from the company's RCI initiatives and lower material and other costs.
Now, let's turn to our segment results for the quarter, starting with the C&I on slide seven.
Aldo: Operating expenses as a percentage of net sales rose 50 basis points to 29.2% from 28.7% in 2023 primarily due to the lower sales volumes.
Allo: Sales of $365 $7 million compared to $366 $4 million last year, reflecting a two 1% organic sales decline, partially offset by $7 $2 million of acquisition related sales.
Aldo: Operating earnings before financial services of $252.4 million in the quarter, compared to $245.2 million in 2023. As a percentage of net sales operating margin before financial services of $22%, represented an improvement of 80 basis points from the $21.2% report of last year.
Allo: The organic decrease was primarily due to the double digit reduction with respect of inter segment sales of power tools and a mid single digit declines the segment's European based hand tool businesses.
Allo: These were partially offset by a gain in sales to customers in critical industries, including a high single digit increase in specialty torque.
Aldo: Financial Services revenues of $100.4 million in the third quarter of 2024 compared to $94.9 million last year, while operating earnings of $71.7 million compared to $69.4 million in 2023. Consolidated operating earnings of $324.1 million compared to $314.6 million last year, as a percentage of revenues the operating earnings margin increase.
Allo: With respect to critical industries. In addition to higher torque product sales defense and aviation related activity was strong, but it was somewhat offset by declines in the natural resources sector.
Allo: Gross margin improved 220 basis points to 41, 2% in the third quarter from 39% in 2023. This is largely due to the increased sales volume and higher gross margin critical industry sectors lower material and other cost savings from RCI initiatives and 50 basis points of benefit from acquisitions.
Aldo: 90 basis points to 26 percent from 25.1 percent to 2023. Third quarter effective income tax rate of 22.9 percent compared to 22.6 percent last year.
Aldo: Net earnings is $251.1 million compared to $243.1 million in 2023, and Net earnings per diluted share of $4.76 in the quarter compared to $4.51 per diluted share last year, and increase of $4.2%.
Allo: These improvements were partially offset by 30 basis points of unfavorable foreign currency effects.
Allo: Operating expenses as a percentage of sales rose 140 basis points to 24, 5% in the quarter from 23, 1% in 2023, primarily due to investments in personnel and other costs and a 50 basis point impact from acquisitions.
Aldo: Now, let's say to our segment results for the quarter. Starting with CNI on slide 7.
Aldo: Sales of $365.7 million compared to $366.4 million last year reflecting a 2.1% organic sales decline, partially offset by $7.2 million of acquisition related sales.
Allo: Operating earnings for the C&I segment of $61 million compared to $58 $1 million last year.
Operating margin improved 80 basis points to 16, 7%.
Allo: 15, 9% in 2023, turning to slide eight.
Aldo: The organic decreases primarily due to double-digit reduction with respect to intersegment sales of power tools and amidst single-digit decline of the segments European-based
Allo: Sales in the snap on tools group of $500 5 million compared to $515 $4 million a year ago, reflecting a three 1% organic sales decline of $900000 of favorable foreign currency translation.
Aldo: These were partially offset by again in sales to customers in critical industries, including a high single visited increase in specialty torque.
Allo: The organic decrease reflects a mid single digit decline in our U S business, partially offset by a low single digit gain in our international operations that being said it is meaningful to highlight that sales of the historically lower third quarter period are higher than the $482 million recorded in the second quarter of this year, representing a sequential increase of three.
Aldo: With respect to critical industries, in addition to higher torque product sales, the fence and aviation related activity was strong, but with somewhat offset by the clients in the natural resources sector.
Aldo: Gross Margin approved 220 basis points to 41.2% in the third quarter from 39% in 2023.
Allo: 8%, we believe this as well as the more modest year over year sales decline in the U S. Van network in the third quarter than in previous quarters favorably demonstrates the resilience of this business.
Aldo: This is largely due to the increased sales volume of higher gross margin critical industry sectors, lower material and other costs, savings from RCI initiatives and 50 basis points of benefit from acquisitions.
Allo: Gross margin improved 100 basis points to 47, 3% in the quarter from 46, 3% last year, primarily due to lower material and other costs and benefits from RCI initiatives.
Aldo: These improvements were partially offset by 30-based points of unfavorable foreign currency effects.
Aldo: Operating expenses is a percentage of sales rows of 140 basis points to 24.5% in the quarter from 23.1% in 2023. Primarily due to investments in personnel and other costs, and a 50 basis point impact from acquisitions.
Allo: Operating expenses as a percentage of sales rose 140 basis points to 25, 7% in the quarter from 24, 3% in 2023, largely due to the lower sales volume.
Allo: Operating earnings for the snap on tools group of $108 3 million compared to $113 $4 million last year, the operating margin of 21, 6% compared to 22% in 2023.
Aldo: Operating earnings for the CNI segment of $61 million compared to $58.1 million last year.
Aldo: The operating margin improved 80 basis points to 16.7% from 15.9% in 2023. Turning down the slide A.
Allo: Turning to the <unk> group shown on slide nine.
Allo: Okay.
Aldo: Shield of the Snap-On-Tools Group of $500.5 million compared to $515.4 million a year ago, reflecting a 3.1% organic sales decline in $900,000 of favorable for currency translation.
Sales of $422 7 million compared to $431 $8 million in 2023, reflecting a one 9% organic sales decline of $900000 of unfavorable foreign currency translation.
Organic decrease includes a mid single digit decline in the sales of under car equipment at a low single digit reduction in activity with OEM dealerships, where we often see variability in our central tool programs from period to period.
Aldo: The organic decrease reflects a mid-single digit decline in our U.S. business, partially offset by a little single-digit gain in international opportunities.
Aldo: That being said, it is meaningful to highlight that sales in an historically lower third quarter period are higher than the $488.000 recorded in the second quarter of this year, representing a sequential increase of 3.8%.
These decreases were partially offset by a low single digit gain in sales of diagnostics and information products that independent repair shop owners and managers.
Aldo: We believe this, as well as the more modest year-over-year sales declined in the U.S. van network in the third quarter, than a previous quarters, favorably demonstrate the resilience of this business.
Allo: Gross margin improved 190 basis points to 47, 4% from 45, 5% last year, primarily reflecting increased sales of higher gross margin products.
Aldo: Go smart and improve the 100 basis points, to 47.3% in the quarter from 46.3% last year, primarily due to lower material and other costs and benefits from RCI initiatives.
Allo: Operating expenses as a percentage of sales rose 80 basis points to 22% from 21, 2% in 2023, largely due to lower sales volumes and increased personnel and other costs.
Aldo: Operating expenses as a percentage of sales rose on 40 basis points to 25.7% of the corner from 24.3% to 20.23. We'll actually do to the lower sales one.
Allo: Operating earnings for the <unk> group of $107 $3 million compared to $104 $9 million last year. The operating margin improved 110 basis points to 25, 4% from the 24, 3% reported last year.
Aldo: Operating earnings of the Snap on Tools Group of $180.3 million compared to $113.4 million last year. The operating margin of 21.6% compared to 22% in 2023.
Allo: Now turning to slide 10 Rev.
Allo: Revenue from financial services increased $5 5 million or five 8% to $100 $4 million from $94 $9 million last year, primarily reflecting the growth in our loan portfolio.
Aldo: 3rd of the RS and I group show on on slide 9.
Aldo: Sales of $422.7 million compared to $431.8 million in 2023 reflecting a 1.9% organic sales decline in $900,000 of unfavorable for currency translation.
Allo: Financial services operating earnings of $71 7 million compared to $69 4 million in 2023.
Allo: Financial services expenses were up $3 $2 million from 2023 levels, including $2 $4 million of higher provisions for credit losses sequentially. The provisions for credit losses were lower by $1 $6 million.
Aldo: The organic decrease includes a mid-singled digit decline in the sales of undercar equipment and a low-singled digit reduction in activity with OEM dealerships Where we often see variability in essential tool programs from period to period
Allo: And the third quarters of both 2024 and 2023 the average yield on finance receivables was 17, 7% for the.
Aldo: These decreases were partially offset by a low single digit gain in sales of diagnostic and information products that independently pair shop owners and managers.
Allo: Third quarters of 2024 and 2023, the average yield on contract receivables were nine 1%, an eight 8% respectively.
Aldo: Rosemargin approved 190 basis points to 47.4% from 45.5% last year. Primarily reflecting increased sales of higher gross margin products.
Allo: Loan originations of $288 million in the third quarter represented a decrease of $17 $2 million or five 6% from 2023 levels, reflecting a six 7% decline in extended credit originations and a one 3% decrease in originations of contract receivables.
Aldo: Operating the expenses is a percentage of sales, rose 80 basis points, 22% from 21.2% in 2023, wisely due to lower sales volumes and increased personnel as other costs.
Aldo: Operating earnings for the Arts and I Group of Honor, $7.3 million compared to $4.9 million last year. The operating margin improved to 110 basis, twice to 25.4% from the 24.3% reported last year.
Allo: The decrease in extended credit originations, mostly reflects lower sales of big ticket items geographically extended credit originations were consistent with the sales activity in the tools group with a decline in the U S only partially offset by growth in originations internationally.
Aldo: Now, turning the side 10.
Aldo: Revenue from Financial Services increased $5.5 million or $5.8% to $100.4 million from $94.9 million last year, primarily reflecting the growth of the loan portfolio. Financial Services operating earnings of $71.7 million compared to $69.4 million in 2023. Financial Services expenses were up $3.2 million from $223 levels, including $2.4 million of higher provisions for credit losses.
Moving to slide 11.
Allo: Our quarter end balance sheet includes approximately $2 $5 billion of gross financing receivables with $2 2 billion from our U S operation.
Allo: For extended credit or finance receivables. The U S 60 day, plus delinquency rate of one 9% is up 40 basis points from the third quarter of 2023 trailing 12 month net losses for the overall extended credit portfolio of $62 3 million represented 311% of Outstandings at quarter end.
Aldo: Sequentially, the provisions for credit losses were lowered by $1.6 million.
Allo: While delinquencies and net losses are trending upward we believe that these portfolio performance metrics remain relatively balanced considering the current environment.
Aldo: And the third quarter is of 12, 24, and 20, 23, the average yield on financial receivables was 17.7% and the third quarter is of 20, 24, 20, 3, the average yield on contract receivables were 9.1% and 8.8% respectively.
Now turning to slide 12.
Allo: Cash provided by operating activities of $274 $2 million in the quarter represented 106% of that earnings and compared to $285 $4 million last year.
Aldo: Start a lot of regulations of 288 million dollars on the third quarter represented a decrease of 17.2 million dollars or 5.6 percent from 2023 levels reflecting a 6.7 percent decline in extended credit origination.
Allo: The decrease in cash flow as compared to the third quarter of 2023, primarily reflects increases in working investments, which were partially offset by higher net earnings.
Allo: Net cash used by investing activities of $40 $5 million, mostly reflected net additions to finance receivables of $26 million and capital expenditures of $24 million.
Aldo: and a 1.3% decrease in the regulations of contract receivables.
Aldo: The decrease in extended credit for reginations, mostly reflects lower sales of big ticket items. Geographically, extended credit reginations were consistent with the sales activity in the tool's group, with a decline in the U.S. only partially offset by growth in a reginations internationally.
Allo: Net cash used by financing activities of $156 2 million included cash dividends of $97 $9 million on the repurchase of 215000 shares of common stock for $59 $9 million under our existing share repurchase programs as of quarter end, we had remaining availability to repurchase up to an additional 400.
Aldo: We're going to slide 11. Our quarter-end balance sheet includes approximately $2.5 billion of gross financing receivables with $2.2 billion from our U.S. operation.
Allo: $71 $5 million of common stock under our existing authorizations, including under the $500 million authorization recently approved by the board of directors in August of this year.
Aldo: For extended credit or finance receivers, the U.S. 60 day plus the link with the rate of 1.9% is up 40 basis points from the third quarter of 2023. Trailing 12 months net losses for the overall extended credit portfolio of 62.3 million represent a 3.11% of outstandings at quarter end.
Allo: Turning to slide 13.
Allo: Trade and other accounts receivable increased $5 $1 million from 2023 year end days sales outstanding of 61 days compared to 60 days at year end 2023 inventories.
Aldo: was the Lincoln Season that losses a trending upward. We believe that these portfolio performance metrics remain relatively balanced considering the current environment. Now, 30 to 12.
Allo: Inventories decreased $10 $1 million from 2023 year end on a trailing 12 month basis inventory turns of $2 three remains unchanged from Europe.
Aldo: Gas provided by operating activities of 274.2 million dollars in the quarter represented 106% of that earned in compared to 285.4 million dollars last year.
Allo: Our quarter end cash position of 1 billion $313 3 million compared to 1 billion $1 $5 million at year end 2023.
Aldo: The decrease in cash flow is compared to the third quarter of 2023. Primarily reflecting increases in working investment, which were partially offset by higher debt earnings.
Allo: Listen to cash and expected cash flow from operations, we have more than $900 million available under our credit facilities as of quarter end. There were no amounts outstanding under the credit facility and there were no commercial paper borrowings outstanding.
Aldo: That cash used by investing activities of $40.5 million, most of you reflected in that addition to financial receivables of $20.6 million and capital expenditures of $20.4 million.
That concludes my remarks on our third quarter performance I'll now briefly review a few outlook items for 2024 for the full year, we expect that capital expenditures will be approximately $100 million and we currently anticipate that our full year 2024 effective income tax rate will be in the range of 22% to 23% finally with respect to <unk>.
Aldo: that cash used by financing activities of $156.2 million, including cash dividends of $97.9 million. And the repurchase of 215,000 shares of common stock for $59.9 million under our existing share repurchase programs.
Allo: Corporate costs, we would expect expenses in the upcoming fourth quarter to be more in line with those incurred in the third quarter of this year as the fourth quarter of 2023 included some benefit for the recovery of costs associated with a legal matter, which will not repeat.
Aldo: As of quarter-end, we had remaining available to repurchase up to an additional 4171.5 million dollars of common stock under our existing authorizations, including under the $500 million authorization recently approved by the Board of Directors and August of this year.
Now I'll turn the call back to Nick for his closing thoughts Nick Thanks.
Aldo: Training to fly 13.
Aldo: Trades and other accounts are suitable increase 5.1 million dollars from 2023-year-end. They sales outstanding of 61 days compared to 60 days at year end 2023.
Nick: Thanks Aldo.
Nick: Well, that's our quarter.
Nick: Resilience against the turbulence.
Nick: We believe the period demonstrated that with great clarity sales attenuated.
Aldo: Eventhorses decreased $10.1 million from 2023 year ends, trailing 12-month basis, Eventhorses turns of 2.3 remains unchanged from year end.
Nick: With great products solving critical tasks material savings in RCI drove strong and substantial gains in gross margins strong enough.
Aldo: A quarter-and-cash position of $1,313.3 million compared to $1,1.5 million. A million dollars a year and 2023.
Nick: That we're able to keep investing in our product brand and our people maintaining and building them for the opportunity to comp and still increase Oi margin significantly.
Aldo: and addition to cash, expected cash flow from operations, we have more than $900 million available under our credit facilities. As a quarter-end, there were no amounts of standing under the credit facility and there were no commercial paper borrowing subspinning.
Nick: And all of that was authored by the ongoing characteristics of our end of the snap on enterprise.
Nick: Businesses.
Nick: That is strategically positioned for advantage for establishing and maintaining ongoing connections to the customers' processes embedded in snap on value creation that really do deliver progress.
Aldo: That concludes my remarks on our third quarter performance on Alp Briefly Review of Hugh, Outlook Guidance for 2024.
Aldo: For the full year, we expect the capital expenditures will be up approximately $100 million. And we currently anticipate that our full year 2024 effective income tax rate will be in the range of 22 to 23 percent finally.
Nick: Every day.
Nick: And a very capable team that is committed to our enterprise greatly experienced and battle tested and is well able to consistently Marshall advantage to drive for driving positive outcomes.
Aldo: With respect to corporate costs, we would expect expenses in the upcoming force quarter to be more in line with those incurred in the third quarter of this year. As a fourth quarter of 2023, included some benefits for the recovery of costs associated with a legal matter which will not repeat.
Nick: And you see that.
Nick: All across our corporation C&I sales down low single digits for profits up Oi margin of 16, 7% up 80 basis points gross margins up 220 basis point gains from wielding customization in the critical industries. The tools group meeting the challenges of the challenges of the day executing the pivot to quick payback items clothing.
Speaker Change: I'll now turn the call back to Nick for his closing thought Nick. Well, thanks, Aldo.
Nick: Oh, that's our quarter.
Nick: The sales gap and displaying momentum sales down low single digits Oi margin was 21, 6% down 40 basis points, but gross margins up 100 basis points arsenide wielding its advantage with software sales down low single digits, but profit's up NOI margins of 25, 4% up 110 basis points in gross margin.
Nick: Resilience against the Turbulence.
Nick: We believe the period is demonstrated that with great clarity, sales, and tenduys. A great product solving critical tasks, material savings, and our CI's role is strong, and substantial gains in gross margins, strong enough that we're able to keep investing in our product brand, and our people, maintaining and building them for the opportunity to come and still increase OI margin significantly.
190 basis points.
And it all came together this corporation sales attenuated lower by one 7% organically, but Oh why rising from last year, Oi margins, reaching 22% up 80 basis points and gross margins up triple digit basis points all across the corporation.
Nick: and all of that was authored by the ongoing characteristics of our end of the snap on enterprise.
Nick: Bittin'
Nick: Better strategically positioned for advantage for establishing and maintaining ongoing connections to the customers. Processes, embedded in snap-on-value creation that really do deliver progress every day.
Nick: And an EPS of $4 70.
Nick: Versus every up over every comparison it was another encouraging quarter.
Nick: And we believe that propelled by our device decisive advantage in our in our products and our brands and our people all maintained and strengthened even in a turbulent snap on will continue its momentum so clearly demonstrated in the quarter and extended our trend of positive performance well onto the days and years to come.
Nick: and a very capable team.
Nick: That's committed to our enterprise, greatly experienced and battle tested, and is well-able to consistently marshal advantage to drive for driving positive outcomes.
Nick: and you see that!
Nick: All the cross record bridge. See how I say I was down, low single business for profits up, OI margin 16.7% up 80 basis points. Growth margins up 220 basis points, games from wielding customization in the critical industry.
Nick: Now before I turn the call over to the operator.
Nick: I want to speak directly to our franchisees and associates.
Nick: Tutorials will meeting the challenges of the day, the challenges of the day.
Nick: As always I am.
Nick: So many of you are listening.
Nick: Executing the pivot to quick payback guys, closing the sales gap and displaying momentum. Sales down, low single digits, all I margins is 21.6% down, 40 basis points. But gross margins up 100 basis points.
Nick: Our quarter demonstrates that snap on does indeed prevailing turbulence.
Nick: And once again you are the creators of that result hard won.
Nick: For your achievements in authoring our success you have my congratulations for the skill energy and experience you bring to bear every day on behalf of our team you have my admiration.
Nick: Arts and I wielding its advantage with software. Sales down low single digits but profits up and all I marges is 25.4% up to 110 basis point and goes marges up 190 basis points.
Nick: And for your unshakable confidence in and dedication to the future of our enterprise you have Mike. Thanks, now I'll turn the call over to the operator operator.
Nick: and they all came together this corporation. Sara's a ten-way, it's lower by 1.7% or, again, but all I rise in from last year, all I margins reaching 22% up 80 basis points, and Gross margins up triple digit basis points, all across the corporation.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one on your telephone keypad.
If you were using a speaker phone please pick up your handset before pressing the keys.
Nick: and an EPS report out of the 77th, up versus every up over every comparison, it was another encouraging quarter.
Speaker Change: To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Nick: and we believe that propelled by our device, the sight of advantage in our in our product, in our brand, in our people, all maintained and strengthened, even in the turbulence. Snap-on will continue its momentum. So clearly demonstrated in the quarter and extended our trend of positive performance well on through the days and the years to come.
Speaker Change: Our first question is from Christopher Glynn with Oppenheimer. Please go ahead.
Christopher Glynn: Thanks, Good morning, Nick although Sarah.
Speaker Change: Good morning.
Christopher Glynn: Good morning, I wanted to dive into the kind of seasonal strength.
Nick: Now, before I turn the call over to the operator.
Christopher Glynn: Does that feel like kind of a.
Nick: I want to speak directly to our franchises and associates
Christopher Glynn: Reset baseline for normal seasonal kind of pattern from here, where you usually have a door.
Nick: As always.
Nick: I know many of you are listening.
Christopher Glynn: Sure.
Nick: Our quarter demonstrates that snap-on does indeed prevail in turbulence.
Yes, maybe that gets into what the sell in sell through was in the third quarter, two and that needs to be tested on the sell through.
Nick: and once again, you are the creators of that result, hard one.
Speaker Change: Yeah, No that's correct.
Nick: for your achievements and authoring our success, you have my congratulations for the skill, energy and experience, you bring to bear every day on behalf of our team, you have my admiration.
Speaker Change: This is a sell through as you know hasnt been the sales off the van for some time have been a little bit more than our sales to the ban in this particular quarter was it was slightly reversed in that situation.
Nick: and for your unshakable confidence in and dedication to the future of our enterprise, you have my thanks. Now I'll turn the call over to the operator operator.
Speaker Change: The sales to the ban we were a little bit better, but the third quarter, it's kind of a hard one to predict I always call. It squarely in that situation. So we have if it wasn't for the third quarter. I think this is much more definitive bot blocks, it's clear that the tools group is doing better certainly did better in the third quarter and we have.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question, you may press star, then one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys.
Speaker Change: Not seen a third quarter over the second quarter and a dog's age except for the one and the Covid, where we had we came out in a V shaped recovery in the third quarter.
Speaker Change: To withdraw your question, please press star then too. At this time, we will pause momentarily to assemble our roster.
Speaker Change: But you can look back for a long time and you don't see that this is the total group and into the you know to the U S. In general and so we view it as some momentum. The question is and I suppose will they be able to continue that momentum and we think they can we like their products and we like the fact that doing this has come out of their profitability up 100 basis points, you know they've got a little bit of volume.
Speaker Change: Our first question is from Christopher Glenn with Oppenheimer, please go ahead.
Christopher Glenn: Thanks. Good morning Nick Aldo, Sara.
Christopher Glenn: According, one of the dive into the kind of seasonal strength at SOT, does that feel like kind of a reset baseline for normal seasonal kind of patterns from here? We usually have a fourth quarter left door.
Speaker Change: And in fact with the Hartford's just points of gross margin wielded by great new products and the manufacturing efficiencies in some ways that come out of the new expansions that are more productive than the old and of course, the major plants in the United States. So we think that things are moving positively, but you know, we don't give guidance, but I like our chances going forward.
Speaker Change: Yes, maybe that gets into what the cell-in cell-through was in the third quarter, too, and that needs to be tested on the cell-through and the current quarter.
Speaker Change: The shelter as you know hasn't been the sales off the van for some time have been.
Speaker Change: Are there tools.
Speaker Change: Sounds great and then just switching on <unk>, it's been very steady run rates third quarter a bit of a.
Speaker Change: A little bit more than I say else to the van and this particular quarter with a slightly reversed in that situation.
Speaker Change: Yes, historically not much routine seasonality, though <unk> last year also.
Speaker Change: You know, the sales to the van, we're a little bit better, but the third quarter it's kind of a hard one to forget. I always call it squirreally in that situation, so we, we, we, we, we, we, if it was a further third quarter, I, you know, I think this is much more to the end, but
Speaker Change: We deviated a little lower versus kind of the way the business had been trending. So curious if you can offer any insight around that maybe.
Speaker Change: It feel like the equipment side is entering an interim pause after some.
Speaker Change: But it's clear that the tools group is doing better, certainly did better in the third quarter and we have not seen a third quarter over the second quarter in a dog age except for the one in the COVID where we had we came out of V-shaped recovery in the third quarter.
Speaker Change: Steady REIT customers recapitalizing.
Speaker Change: I would say is look I think the thing as I stated that the the I've said in my very simple hardware down software up and also the hardware piece is the equipment piece and that was there was some attenuation of that some of that can be seasonal.
Speaker Change: But you can look back for a long time and you don't see that and this is the total group and it's the US and general and so we view it at some moment.
Speaker Change: I don't know I wouldn't hang my hat on that but there is a little bit of headwind in the third quarter vacations that happened in the garages and so on and stuff like that but I think there is there is some uncertainty in the garages that may weigh on that and we'll see how that plays out going forward.
Speaker Change: The question is, you know, I suppose we'll be able to continue that momentum, we think they can we like their products, and we like the fact that doing this has come out of their profitability up to 100 basis points, you know, they got a little bit of value in fact, but the 100 basis points it grows margin wielded by great new products.
Speaker Change: Look I think the other piece of it is the OEM, the OEM lumpy business, which kind of hit a flat spot in this quarter, but we don't think that that's going to be continuing every quarter. It's just that it's lumpy and we happen to catch a lot.
Speaker Change: and the manufacturing efficiencies in some ways that come out of the new expansions that are more productive than you all in across the major plants in the United States. So we think things are moving positively, but we don't give guidance, but I like our chances going forward for the source.
Speaker Change: Downward lump depression in this quarter, but the real good thing is if you look at the software businesses. You look at you know the diagnostics business. The Mitchell those business via the diagnostics and information, which is Mitchell and diagnose it yourself that repair shop owners and managers up and all the things are profitable and then you have the sales to the.
Speaker Change: Tom's great, and then just switching on RS and I, it's been very sturdy, run rate, learn quarter a bit of us.
Speaker Change: stepped down historically not much routine seasonality, though 3Q last year also kind of deviated a little lower risk at the way the business had been trending. So, here's speaking off any insights around that, maybe you know, as a feel like the equipment side is entering an interim pause after some, you know, steady, recustomers recapoliding.
Speaker Change: Sales of <unk>.
Parts of that electronic parts catalog another software piece and it up and if you look at the software in the tools group associated with diagnostics.
Speaker Change: It's a we're increasing the horse.
Speaker Change: Following a hardware launches, but increasing the software it looks pretty strong and if you look at the software and the diagnostic just in the tools business, that's a pretty good.
Speaker Change: Well, I say this, look, I think this thing is I've stated it's the, I've said am I very simple, hardware down, software up. You know, so the hardware piece is the equipment piece and that was, there was some attenuation of that, some of that can be seasonal.
Speaker Change: Piece of business, that's up year over year and that helped drive some of the profitability in the tools group. So I feel pretty good about ours, hi, I'm not so worried about it I think and by the way if the trade off the software businesses with high margins for a little bit of turbulence in the hardware business. When you do it I would.
Speaker Change: I don't know, I wouldn't hang my hat on that, but there is a little bit of headwind in the third quarter of vacation to happen in the garage and so on and stuff like that. But you know, I think there is someone certainty in the garage that may weigh on that and we'll see how that plays out going forward.
Nick Pinchuk: Thank you Nick.
Speaker Change: The next question is from Gary <unk> with Barrington Research. Please go ahead.
Speaker Change: Look, I think the other piece of it is the OEM, the OEM Wantsby business.
Nick Pinchuk: Yeah.
Speaker Change: Hey, good morning, all.
Speaker Change: Okay.
Speaker Change: which kind of hit a flat spot in this hoarder, but we don't think that's going to be continuing every quarter, it's just that a clumpy and we happen to catch a lock.
Speaker Change: You did try and give us a peek here.
Speaker Change: What this pivot.
Speaker Change: In the tools group, how it impacted.
Speaker Change: and Downward Lump, a depression in this quarter, but the real good thing is if you look at that the so-called business.
The quarter and on a quarterly basis sequentially were up $18 million.
Speaker Change: You look at, you know, the Diagnostic Business, the Mitchell Business, the Diagnostic Information which is Mitchell and Diagnostic itself, the Repair Shop owners are managers of OP and those things are profitable. And then you have the sales, you know, sales of...
Speaker Change: Could you maybe just help us here with the majority of that sequential increase due to the pivot.
Speaker Change: Sales.
You know a lot of it was hand tools.
Speaker Change: Hand tools were the strongest category in this quarter.
Speaker Change: Parts of Catalogues, another software piece. And if you look at the software in the tools group associated with Diagnostic yet, you know, it's a, we're, we're, we're following hardware launches, but increasing the software looks pretty strong. And if you look at the software in the diagnostic, just in the tools business, that's a pretty good piece of business that's up year over year. And that helped drive some of the profitability in the tools group. So I feel pretty good about our tonight. I'm not so worried about it. I think. And by the way, if you could trade off the software business as a high margin for a little bit of turbulence in a hardware business, when you do it, I would.
Speaker Change: It was a bigger why are we why you can see the pivot is when you look at it all I don't like I don't like parts in those numbers hitting it would be a little bit little bit squirrelly from quarter to quarter, but really hand tools.
Speaker Change: Representing a greater mix of tools group sales for the franchisees in this quarter and then for a lot then all the way back to the pandemic.
Speaker Change: So.
That is helping drive that is the that is the real.
Speaker Change: Testimony to the to the to the.
Speaker Change: Pivot because that is what we wanted to have happen. Because this is what customers are ready to buy and that helped a lot of that.
Nick Pinchuk: Thank you, Nick.
Speaker Change: The next question is from Gary Precipino with Berington Research, please go ahead.
Speaker Change: Situation plus it helps the margins.
Speaker Change: Is it safe to say that a lot of this was due to new products coming into the market.
Gary Precipino: Good morning, thank you, you did try and give us a peek here as to what this pivot.
Speaker Change: Oh, Yeah, I think yeah, and they're also promotions you know overlay look we had 4500 is a little thing 4500 products I think FCA use displayed on our tool show at the SFC and 500 were new in some way.
Gary Precipino: and the tools group how it impacted the quarter, and on a quarterly basis, sequentially, you
Gary Precipino: because you maybe just help us here was the majority of that sequential increase due to the pivot.
Speaker Change: Now I'm, not saying that we're all breakthrough products you know but.
Speaker Change: 500 4500.
Speaker Change: Franchisees can say I'm offering.
Gary Precipino: in failed.
Nick Pinchuk: You know, a lot of it was Pinchuk.
Speaker Change: Our customers something they couldn't quite have before.
Nick Pinchuk: Hansels were the strongest category in this quarter and it was a bigger, why you can see the pivot is when you look at it all.
Speaker Change: And so that qualifies as something new and it gives you something to sell and that helped push some of this and a lot of that was in that area.
Nick Pinchuk: I don't like, I don't like carcinels numbers, because it'd be a little bit
Speaker Change: Although you know Oklahoma.
Speaker Change: Make promotion can also make handles look good if you're if you strike the right court.
Nick Pinchuk: and a little bit squirrely from quarter to quarter, but really hand tools in represented major mix.
Speaker Change: Yeah.
For example by it set a handful as you get a dinner with Albert <unk>. For example, this will this will sell a lot of things.
Nick Pinchuk: of tools group sales for the franchisees.
Nick Pinchuk: in this quarter, then for a long way back to the pandemic.
Speaker Change: So I buy a whole snap on tool box tool to do that.
Nick Pinchuk: and Lowe.
Nick Pinchuk: That is the real testimony to the pivot because that is what we wanted to have happen. Because this is what customers are ready to buy and that helps go out of that.
Speaker Change: I'll remember that in the last.
Speaker Change: The last question is.
Speaker Change: It seems like you've kind of talked about your torque products C&I over the last couple of quarters.
Nick Pinchuk: situation process, make help for the margins.
Speaker Change: No I think that is something changing in the market that is moving more towards specialty work I know youre developed products and obviously you've made some acquisitions.
Nick Pinchuk: Is it safe to say that a lot of this was due to new products coming into the market that you introduced? I think, yeah, and there are also promotions, you know, overlaid. Look, we have $4,500. There's a little thing, $4,500 products. I think SKUs displayed on our tool show at the FFC and both $500 were new in some way.
Speaker Change: That area, but could you just help us out on what what what kind of secular tailwind there are that's driving before.
Speaker Change: Can answer that in asking your question can you say the word Boeing.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: I think I think.
Nick Pinchuk: Now, I'm not saying it will all break through products, you know, but there were 545, you know, franchises could say, I've often, our customers, something they couldn't quite have before.
Speaker Change: Yes, it's a little bit light, but this is kind of an example, I think people are becoming more and more aware that the mechanisms throughout critical industries are more and more complex and therefore precision has the precision has to be.
Nick Pinchuk: And so that qualified as something new and it gives you something to sell and that helped push some of this and a lot of that was in that area.
Speaker Change: Greater than May have been applied in the past. So one we need more precise tools and torque wrenches are an element of that hour deliver of that and the more accurate. They are the wider range. They are the better you are able to do that in your operations. That's number one and then the second one Gary is everybody wants to say if something goes wrong I wanted to be able to tell people that I did the right.
Nick Pinchuk: Hello, you know, you can make promotion can also make handles look good if you strike the right court.
Nick Pinchuk: for example, this will sell a lot of things.
Speaker Change: I did the right product you know I did the right thing.
Nick Pinchuk: i
Nick Pinchuk: Now let's get it by a whole snap on toolbox at all just to do that.
Speaker Change: Perform the task and a lot of our products connect with the central system in our factory recording and documenting the torque the.
Speaker Change: The fasteners are applied correctly and that is helping drive it. So the combination of the idea of being accurate and the <unk>.
Speaker Change: The moment and being able to do it with accuracy and ease on a line and secondly, the document is helping torque go upwards and that business grew both in profits and sales in the quarter. We liked it and as you know we've been investing in doing and we've been making quite a few investments in.
Speaker Change: Now, how's that? Is something changing in the market that is moving more toward specialty torque? I know you're a developer, I know obviously you've made some acquisitions in that area, but could you just help us out on what kind of secular tailwinds there are that's right? I can answer that in an espionuel question. Can you say the word going?
Speaker Change: Acquisitions, and expanding that business, we like that as a business going forward and it's essential in critical industries and a lot of different places.
Speaker Change: Okay. Thank you sure.
Speaker Change: I think this is, you know, it's a little bit like this, but this is kind of an example. I think people are becoming more and more aware that the mechanisms throughout critical industries are more and more complex. And therefore precision has to be...
Speaker Change: The next question is from David Macgregor with Longbow Research. Please go ahead.
David Macgregor: Yes, good morning, everyone David maintenance.
David Macgregor: Hey, good morning, I Wonder if we could just a couple of just questions for the model SFC order growth I mean, you've indicated last year in the third quarter you saw a mid single digit growth.
Speaker Change: Greater than may have been applied in the past.
Speaker Change: So one, you need more precise tools and torque wrenches are an element of that, are a deliverer of that, and the more accurate they are, the wider range they are, the better you're able to do that in your operation, that's number one. And then the second one, Gary, is everybody wants to say if something goes wrong, I want to be able to tell people that I did the right product, you know, I did the right thing, you know, I performed the task, and a lot of our products connect. And then the second one, Gary Prestopino, David MacGregor, David MacGregor, David MacGregor, David MacGregor,
David Macgregor: Just give us some sense.
David Macgregor: Sense of what the order growth.
David Macgregor: They might have looked like this year and just how is the partnership with respect to the street.
David Macgregor: Go ahead, sorry, sorry.
Speaker Change: It was flat year over year, it was up mid singles.
David Macgregor: It was flat year over year.
David Macgregor: So it was fun.
David Macgregor: So in other words, we bought last year was a pretty good one.
David Macgregor: On out of the SFC People's slammed into the wall of uncertainty that they saw ill say some time in and like now you know and they started to back away from their large member, yes, FCA sells its orders and so getting a lot of orders are better than a poke around eye with a sharp stick you know, but so we felt pretty good.
Speaker Change: With the central system in a factory recording and documenting that the torque the fasteners are applied correctly and that's helping drive it. So the combination of the idea of being accurate in the moment and being able to do it with accuracy and ease on the line. And secondly, the document is helping torque go upwards. And that business grew both in profits and sales in the quarter. We like it. And as we know we've been investing and doing and we've been making quite a few investments. I mean, acquisitions and expanding that business, we like that as a business going forward in essential and critical industries in a lot of different places.
David Macgregor: Now this year.
David Macgregor: We don't think there's any surprises on the horizon and people still order about the same amount.
David Macgregor: So and then when.
Speaker Change: When you think when you think about the fulfillment on those orders from SFC this year and sort of the cadence or the timing of those orders will there be anything different in terms of the pattern as they fall across <unk> and <unk> last year.
Speaker Change: Okay, thank you.
Speaker Change: The difference the little difference is this is that we we didn't push it out quite as far.
Speaker Change: The next question is from David McGregor with Longbow Research. Please go ahead.
Speaker Change: Yes, good morning, everyone. Hey, good morning. I wonder if we could just a couple of questions for the model. SFC Order Growth, I mean, you dedicated last year in the third quarter you saw a mid-single digit growth. Can you just give us some sense of what that order growth or decline might have looked like this year and just also with respect to the all right, sorry, sorry. So it was flat year over year or it was up mid-single
Speaker Change: And and so it's a little shorter period, and we've planned some reinforcing promotions in between.
Speaker Change: That belt and suspenders on this kind of thing so we'll see how that plays out that's the <unk> and <unk>.
Speaker Change: Terms of tools talk that's what we're doing but in general right.
David: David It's al.
Speaker Change: Okay. We've got the same amount of orders as last year.
Speaker Change: People don't see the same you know alarming uncertainty arising in front of them theoretically it should go better.
Speaker Change: So we fought the same as, you know, so in other words, we fought last year was a pretty good one.
Speaker Change: But on the other hand, you never know until you know in that situation.
Speaker Change: The problems come out of the SFC. People slammed into the wall of uncertainty that they saw us say sometime in like now, you know, and they started to back away from the Lord. Remember, the SFC ain't sales, it's orders. And so, of course, I'm getting a lot of orders or better than a poking an eye with a sharp stick, you know, but so we felt pretty good. But now this year,
Speaker Change: I just want to clarify you're you've got about the same number of orders that you did last year, but you shipped a little more in <unk> versus <unk>. This year than you would have last year, so what youre, saying.
No I'm, not saying that yes, I am saying that but when.
Speaker Change: When I say the same I mean, I mean about the same amount of orders.
Speaker Change: Adjusted for the time that we we sold these things. So you are saying, okay. Maybe last year, we sold in a couple of we had orders out a couple of weeks in January this year, we didn't have that so when I say the same I'm kind of reading it out over the shorter period and that's the same.
Speaker Change: We don't think there's any surprise around a horizon, and people still are worried about the same amount.
Speaker Change: So when you think about this fulfillment on those orders from SFC this year and sort of the came so the timing of those orders will the be anything different in terms of the pattern as they fall across 3Q and 4Q that last year. Yeah, the difference, the little difference is this is that we didn't push it out quite as far.
Speaker Change: Okay, and then question for Aldo on the snap on tools gross Profit's up 100 basis points.
Speaker Change: You called out in your slide deck first cost of raw materials at RCI.
You didn't mention the category mix with a stronger hand tools versus say diagnostics.
Speaker Change: And so it's a little shorter period, and we've planned some reinforcing promotions in between just that belt and suspenders on this kind of thing. So we'll see how that plays out. That's in terms of tools talk, that's what we're doing. But in general, some differences, David, it's all, okay, we got the same amount of orders of last year, if people don't see the same alarming uncertainty arising in front of them theoretically, it should go better, but on the other hand, you never know until you know in that situation. So I just want to clarify, you got about the same number of orders as you did last year, but you shipped a little more in 3Q versus 4Q this year than you would have last year. So what you're saying?
Speaker Change: Is that just an oversight or is there something that we should.
Speaker Change: Should read into the way you.
Speaker Change: Anything to read into it I think that the product lines you efficiency across the board is better.
Speaker Change: Broadly speaking the cost of steel is down, particularly in some of the cold rolled sheet steel that we use in the Alberta factory, but that's one of the key contributors in the store a little bit more efficient with some of the new factory arrangements. Some of that investment as a result of a slightly better efficiencies. So they're just a little bit better at delivering the demand.
That was in front of them.
Speaker Change: And the product mixes.
Speaker Change: Hand tools gives you a little bit favorable libre.
Speaker Change: But it was across the board.
Speaker Change: No, I'm not saying that. Yes, I am saying that. But in other words, when I say the same, I mean about the same amount of orders adjusted for the time that we sold these things. So you're saying, okay, maybe last year we sold in a couple of weeks, had orders out a couple of weeks in January . This year we didn't have that. So when I say the same, I'm kind of rating it out over the shorter period and that's the same. So you're saying the same. You're saying the same. You're saying the same.
Speaker Change: Okay, but it sounds like maybe that the category mix is not quite as big of a contributor to this quarters. It has been in previous quarters.
Speaker Change: Oh sure.
Speaker Change: So let me say that I don't know where you get that idea I mean, the point is is that because three three pieces of this as Alan just said, it's it's the category mix. The product mix. There is there was a as I said there is efficiencies in the factories that are in there you know RCI and the fact that there is some material cost. So the three things pushing that you're talking about the 100.
Speaker Change: Okay. And then question for Aldo, on the Snap-On Tools gross profits, up 100 basis points, you called out in your slide deck price cost or raw materials at RCI. You didn't mention the category mix with the stronger hand tools versus say diagnostics. Is that just an oversight or is there something that we should read into the way you've been doing this or that I think that the product lines, the efficiency across the board is better.
Speaker Change: Basis points improvement right Yeah, those are the three things.
When I was talking about it sounds like.
Speaker Change: Nice profitability is indication of the effect of the pivot.
Speaker Change: So that helped our sales.
Speaker Change: Next question for me just on the fourth quarter. The snap on tools segment again, you've got an easier compare on a year over year basis.
Speaker Change: Uh huh.
Speaker Change: You talked about the third quarter truck restock going on.
Just how are you thinking about the growth puts and takes for <unk> and snap on tools.
Speaker Change: Broadly speaking, the cost of steel is down particularly in some of the cold-rolled sheets steel that we use in the Aldona factory. But that's one of the key contributors and they just are a little bit more efficient with some of the new factory arrangements. Some of that investment has resulted in slightly better efficiencies. So they're just a little bit better at delivering the demand that was in front of them. And the product mixes with extension. Yes, hand tools gives you a little bit favorably, but they were, you know, it was across the board.
Well look.
Speaker Change: That's a tough call.
Look we don't give guidance there are a lot of variables going forward, but I like our chances.
Speaker Change: I'll say it looks if you're talking about the snap on tools group. The tools group seems to have momentum. So if you were me and you're sitting here and saying look I'm confronted with uncertainty people want to go to a lower payback items I've seen our ability to cater to that to meet that to match that requirement I've seen the factories.
Speaker Change: Okay, it sounds like maybe that category mix is not quite as big a contributor to this quarter as it has been in previous quarters.
Speaker Change: I don't know where to get that idea. I mean the point is that three pieces of this is Aldo just said it's the category mix, you know, the product mix.
Speaker Change: Come on stream I've seen us launch new products that are that are compelling and strong so I like where we're going on this I believe were going forward with momentum I can't predict the slope of the curve.
Speaker Change: There was, as I said, there's efficiencies in the factory that are in there, you know, RCI in the factory and there's some material cost. So the three things, Pinchuk, you're talking about the 100 basis point improvement, right? Yeah, there's three things. What I was talking about in terms of ice properties, the indication of the effect of the pivot.
Speaker Change: Right. Okay last question for me I Wonder if you could just update us on franchisee attrition trends.
Speaker Change: You're just talking about what the typical experiences with growth performance when that comes back to them.
Speaker Change: It's been about the same.
Speaker Change: And about the same for some time you know it moves most tenths of a point you know from quarter to quarter and.
Speaker Change: So, then help the cell.
Speaker Change: Next question for me, just on fourth quarter the snap-on-tools segment again, you've got an easier compare on your basis, you talk about the third quarter truck restock going on. How are you thinking about the growth puts and takes for four queue in snap-on-tools?
Speaker Change: The.
Speaker Change: Bill rate varies depending on wells and you find people.
Speaker Change: Are you are we don't like the lower our standards and if people leave in a certain area that we have people in that area. We can easily fine and that's what drives the variation from quarter to quarter I think that's been one of the good things in the quarter was we saw the number of assistance as a percent of franchisees grow. So so I liked that structural point of view.
Speaker Change: Well, look!
Speaker Change: That's a tough call. We don't give guidance. There are a lot of variables going forward, but I like our chances.
Speaker Change: It's true you know maybe 100.
Speaker Change: A number of basis points, so upwards the percentage seems to be moving upward in this era. So I view that as kind of a sub rosa favorable events that won't get all of this uncertainty that's going to accrue to our benefit.
Speaker Change: I'll say it looks if you talk about the snap on tool's group.
Speaker Change: The Toys Group seems to have momentum.
Speaker Change: So, if you were me and you were sitting here and saying, look, I'm confronted with uncertainty. People want to go to lower payback items. I've seen our ability to cater to that, to meet that, to match that requirement. I've seen the fact that these come on stream. I've seen us launch new products that are compelling and strong. So, I like where we're going on this. I believe we're going forward with momentum. I can't predict the slope of the curve.
Speaker Change: Right and the repurchase of inventory from exiting franchisees did that impact the gross number this quarter.
Speaker Change: I know there was some of that there was some of that but I wouldn't have called it a a.
Speaker Change: Difficult change year over year or quarter to quarter, there's some of it but I you know we don't really we haven't seen it to be something that I would report to the world and say Oh, that's a significant thing you ought to consider it but it hasn't changed that much. It can change from time to time, but then this quarter it wasn't.
Speaker Change: Last question for me, I wonder if you just update us on franchise, the attrition trends. You just talk about what the typical experience is with growth performance when that root comes back to what's going on.
Speaker Change: It wasn't a bad year.
Speaker Change: Thanks, Nick appreciate it.
Speaker Change: The next question is from Luke Young with Baird. Please go ahead.
Speaker Change: and it's been about the same for some time, you know, move.
Speaker Change: You know, most tens of a point, you know, from quarter-quarter, and, you know, the still rate varies depending on, well, can you find people, you know, how, how are you, are you, we don't like the lower standards and the people we're even a certain area that we have people in that area we can easily find.
Luke Young: Good morning, Nick Thanks for taking the question Hey, Aldo good to catch up with you to.
First one for me is on the tools group <unk> versus <unk>, great outcome, obviously miscues, it's the opposite as you noted I wanted to focus on.
Luke Young: The execution side clearly the focus on quicker payback items is the same but just be enabling activities. You know what do you think where the bigger contributor or is it the capacity expansion is helping incrementally Milwaukee, especially can you tie it back to getting the mix of promotions read is there something we should be looking at the two cards.
Speaker Change: and that's what drives the variation from quarter to quarter I think that's been one of the good things in the quarter was we saw the number of assistance as a percent of franchisees grow.
Speaker Change: So I like that!
Speaker Change: I'm sure he'll quite a bit of a good one, maybe 100, maybe 100, maybe 100, maybe 100.
Speaker Change: A number of basis points, so upwards, the percentage seems to be moving upward in this era. So I view that as kind of a sub-blows a favorable event that won't get over this uncertainty that's going to accrue to our event.
Speaker Change: All of these above Nic.
Luke Young: Okay.
Nic: It's probably some of all of that and all but look I think the thing is is that.
Nic: We it's a combination of product development.
Speaker Change: and the repurchase of inventory from XC and franchisees to that impact of the growth number of this quarter.
Nic: Pivoting.
Nic: The two pivoting to producing some of the more popular products in the midst of the factory expansion no no easy exercise for a matter of fact for a plant manager.
Speaker Change: There was some of that, there was some of that, but I wouldn't have called it a significant change year over year or quarter to quarter to some of it, but we don't really, we haven't seen it to be something that I would report to the world and say all that's a significant thing, you ought to consider it, it hasn't changed much. It can change from time to time, but then it's quarter wasn't. [inaudible]
And those two things kind of came together with as Al said, you know a range of things. So we had RCI up and down the corporate both from a product from us.
Nic: Design point of view, so we design new products in some cases it allowed us to take advantage of material cost reductions and so a lot of that all came together in this situation driving the gross margin profitability of 100 basis points, you're talking about making a pivot in the sales you're talking about you're talking about pretty much yet.
Speaker Change: I'll see you in the next video.
Speaker Change: Thanks, Nick, for sure that.
Speaker Change: The next question is from Luke Young with Beard. Please go ahead.
Luke Young: Good morning, Nick. Thanks for taking a question, Neil. Good to catch up with you, too. First one for me is on the tools group. You know, 3Q up versus 2Q, a great outcome. Obviously most years it's the opposite. As you know that I want to focus on the execution side. You know, clearly the focus on quicker payback items is the same, but just be enabling activities. You know, what do you think were the bigger contributors? Is it the capacity expansions helping incrementally, Milwaukee especially? Can you tie it back to getting the mix of promotions right? Is there something we should be looking at the tool carts? Is it all the above next? It's probably some of all of that, you know, but look, I think the thing is that. [inaudible]
Nic: Closer to those those quicker payback items and making them work.
And the factory being able to deliver better because we expanded the capacity remember we entered this whole thing up to our eyeballs in in and orders and we couldn't deliver so we expanded our capacity and that's all sort of normalizing out and the factories are able to get more in sync with the with the new products coming out we're able to do.
Nic: Liver better and that's working.
Nic: Got it and then.
Speaker Change: Second if you could just double click on what Youre seeing within diagnostics, specifically, we can see the number obviously in our snipe I'm wondering about tools group as well our C&I flipped from down mid single digit last quarter to now up low single digits no Apollo pluses out there right now is a newer product is that what we are.
Speaker Change: We, it's a combination of product development.
Speaker Change: Pivoting to producing some of the more popular products in the midst of a factory expansion, no easy exercise for a manufacturer plant manager.
Speaker Change: Seeing the arsenide number incrementally does tools group benefited from that as well Nick.
Speaker Change: and those two things kind of came together.
Nick: This group does benefit you know in other words, one of the one of the good things in the quarter as year over year diagnostics were relatively stronger mainly on the launches as Apollo Apollo plus I'm not saying they were incandescent, but they were they were pretty good in this quarter and it was kind of artificially pushing with the pollo plus with the Apollo.
Speaker Change: with his Aldo said, you know, a range of things. We had RCI up and down the clip with bolts from a product, a pull-up.
Speaker Change: Design Pointed View, so we design new products and some cases have allowed us to take advantage of material requests reductions.
Speaker Change: and so a lot of that walked came together in this situation, dragging the gross margin probability of 100 basis points.
Speaker Change: To launch pretty well.
Speaker Change: If you're talking about making the pivot in the cell,
Speaker Change: Early days because it was just introduced at the SFC people got to see the guys on our floor plugging into cars showing how our database can be we'll then it's better it gives them great advantage. So they went to the field enthusiastic about that so.
Speaker Change: You're talking about...
Speaker Change: You're talking about pretty much getting closer to those quicker payback items and making them work and the factory being able to deliver better because we expanded the capacity. Remember, we entered this whole thing up to our eyeballs in orders and we couldn't deliver it. So we expanded the capacity and that's all sort of normalizing out. And the factories are able to get more in sync with the new products coming out. We're able to deliver better and that's worth We're able to deliver better and that's worth
Speaker Change: The sale was was up substantially year over year and the Activations are up nicely in the quarter.
Speaker Change: So at least the last look pretty good you got to see how it plays out and how much legs. It has but we what we like about it is it's the most cost effective way to get intelligent diagnostics and we think that tag line has some appeal.
Speaker Change: and
Speaker Change: Got it. And then second, if you could just double click on what you're seeing within diagnostics specifically, you know, we can see the number obviously in RSNI. I've been wondering about tools group as well. RSNI flipped from, you know, down mid-single digit last quarter to now up a little single digit. You know, Apollo Plus is out there right now as a newer product is that what we're seeing the RSNI number incrementally does, you know, tools group benefit from that as well, Nick.
Speaker Change: Have considerable appeal in the marketplace, so that works pretty well the big the other thing, though that I think can get losses in a number of different ways inside the tools group, which bleeds into both groups and ours and I hand, C&I and.
Speaker Change: Tools group is the rise of software subscriptions are up substantially.
Titles are down but in general software growth is up nicely and I don't have to tell you that that's a nice profitability across the corporation. So that's another factor going on and until June.
Speaker Change: Two-year-of-dust fanfare, in other words, one of the good things in the quarter.
Speaker Change: is a year over your diagnostics, we're relatively stronger, mainly on the launch of this Apollo plot.
Got it appreciate the color. Thanks.
Speaker Change: I'm not saying they were incandescent, but they were pretty good in this quarter, and it was kind of an artificially pushed with the Apollo Plus, but the Apollo Plus seems to launch pretty well.
Yes.
Speaker Change: The next question is from Bret Jordan with Jefferies. Please go ahead.
Speaker Change: Good morning, guys.
Bret Jordan: Hey in the tools group I mean, you talked about improving momentum is that mix in the sense that the low value without the quick payback product is gaining share or are you seeing sort of a sentiment change at the shop level. So it still seems like.
Speaker Change: You know, it's early days, because it's just introduced at the SFC, people got to see the guys on the floor, plugging into cars, showing how our databases can be wheeled, and it's better to do some great advantage, so they went to the field, and there's the issue about that. So, the sale was up substantially year over year, and the activations are up nicely in the quarter, so at least the launch looked pretty good. You've got to see how it plays out, and how much late it has. But what we like about it is it's the most cost effective way to get intelligent diagnostics, and we think that tag line has some appeal.
Bret Jordan: Traffic is pretty sluggish from a talking to parts distributors and the collision industry is still down.
Bret Jordan: Is it mix or is the mechanic sentiment improving.
Speaker Change: Mechanic sentiment is not improving the.
Speaker Change: The garage is though I don't know who you're talking to but the garage is seem to be filled the purchase of capital capital type of equipment in the garages like collision is down and that's kind of off the bottom a little bit and that's seen in our equivalent group, but the sentiment of the technician never we're dealing with the tax in terms of the tools group, you're not seeing that.
Speaker Change: I think 10-get losses in a number of different ways inside the toolscrew, which bleeds into both groups in R and I and I. I mean, in the toolscrew is the rise of software, subscriptions erupts substantially. The titles are down, but in general, software growth is up nicely. And I don't have to tell you that that's a nice property ability across the corporation. So that's another factor going on in toolscrew.
Speaker Change: Change very much what youre seeing though is the tools group pivoting its emphasis to try to present the people attractive and by now ideas that they don't have to finance for three years. They can just deal with them 15 weeks and so that's what we always said would work and it has been working so that's what you see.
Speaker Change: To come back in and for US you know I don't know if you.
Speaker Change: Of course, the whole conversation, but for US one of the real indicators of momentum at least an improvement and the traction that youre seeing that pivot is the idea that the third quarter is up over the second quarter, we see that.
Speaker Change: I'm gonna appreciate the color and the things.
Speaker Change: The next question is from Brett Jordan with Jeffries. Please go ahead. Hey, morning, guys. What? Hey, in the tools group, I mean, you talked about improving momentum. Is that mix in the sense that the low value or the quick payback product is gaining share or are you seeing sort of a sentiment change at the shop level? It still seems like.
Speaker Change: And so that has to say there is some momentum in this situation, but it doesn't have to do with the attitudes get better yeah, the guys, who sell parts of the garage to saying, it's pretty sluggish I guess.
Speaker Change: Although on the corporate expense modeling I mean could you help us a little bit with 25 years, just given the variation that is there is it is running Q3 to Q4 sort of flat is that a rate we should continue into next year.
Speaker Change: Traffic is pretty sluggish from talking to parts of distributors in the collision industry still down. It makes her as the mechanic sentiment improving.
Sure.
Speaker Change: I would say a little bit of hope here in my voice is that what are the reasons that were lower this year as lower performance based compensation expense. So as we reset our plan objectives for 2025, usually start the year, assuming youre going to hit the target. So that means there for that were the case I'd more model 27 ish per quarter or so.
Speaker Change: McCance sentiment is not improving.
Speaker Change: The graduate self, I don't know who you're talking about, but the graduate seem to be filled, the purchase of capital, capital type equipment in the garages, like collision.
Speaker Change: is down and actually you know it's kind of off off the bubble a little bit and that's seen in our equipment group. But the sentiment of the technician, remember we're dealing with the text.
Speaker Change: Something in that range, but that's just how I would think about that Brett but this year.
Speaker Change: in terms of the two old group.
Speaker Change: You're not seeing that change very much, what you're seeing though is the tools we're pivoting at the emphasis.
Speaker Change: We're not growing as fast as we had expected coming into the year. Therefore, that's one of the key reasons why the.
Speaker Change: to try to present to people attractive and by now ideas that they don't have to finance for three years. They can just deal with in 15 weeks and so that's what we always said would work and it has been working.
Speaker Change: Performance based compensation differences.
Speaker Change: Okay, and then a quick question I guess election outcome is one better for you than another if we're gonna tariff imported everything does that make the tools business was competitive or not.
Speaker Change: So that's what you see that come back and, and for us, you know, I don't know, of course, the whole conversation, but for us, one of the real indicators of momentum at least improvement and the traction that you're seeing in that pivot is the idea that the third quarter is up over the second quarter we ain't seen that.
Speaker Change: I think about that.
Speaker Change: Well, who knows you know what I mean, he's got look okay. You hear so many different things, we're not going to tax tips, we're not gonna tax overtime, we're going to we're going to control prices. We're gonna deeming the supermarket, we're gonna tax unrealized capital gains, we're going to tear up the world.
Speaker Change: and so that has to say there's some momentum in this situation, but it doesn't have to do with the attitude to fit better.
Welcome to the Mad Hatter Tea Party no nobody knows what actually is going to happen. So you can't even make up a pronouncement. Each of these could be we want to raise corporate side each of these could be attenuating or not.
Speaker Change: Yeah, the guys who sell parts to the garage as they say it's pretty sluggish. I guess, although on the corporate expense modeling, I mean, it helps us a little bit with 25, you know, it's given the variation that is running Q3 to Q4 sort of flat. Is that a rate we should continue in the next year?
It really depends on the details I don't think you can discern anything from what these guys have been saying of course that they care of everything in the world.
Speaker Change: Up!
Speaker Change: I would say a little bit of hope here in my voice is that there were the reasons that were lower this year as lower performance based compensation expense. So as we reset our plan objectives for 2025, usually you start the year assuming you're going to hit target.
Speaker Change: That's probably you know it'll take some adjustment for that it'll take some adjustment for sure.
Speaker Change: But you know maybe it helps people who sell in the markets, where they produce sometimes that can happen over time.
Speaker Change: So that means if that were the case, I'd more model 27-ish per quarter or something in that range, and that's just how I would think about that, but this year we're not grown as fast as we had expected coming into the year and therefore that's one of the key reasons why there's a performance based compensation differences.
But boy I'd tell you what that's a torturous set of assumptions you have to make that come to any conclusion about which which person would be best or what would help us or hurt us.
Speaker Change: Okay, great. Thank you.
Speaker Change: The next question is from Carolina Jolly with Gabelli. Please go ahead.
Speaker Change: Okay, another quick question, I guess election outcome is one better for you than another. If we're going to tear up imported everything, does that make the tools business less competitive? I'll help you out.
Speaker Change: Alright, Thank you for taking my question.
Carolina Jolly: So it sounds like within Arsenite Safran diagnostics, a higher margin business is doing well, but can.
Can you remind me what what's kind of happening in that in terms of the hardware in that business.
Speaker Change: Who the hell? Who knows? You know what I mean? Please, guys!
Speaker Change: Look, okay, you're here so many different things. We're not going to tax tips, we're not going to tax overtime, we're going to control prices, we're going to ding the supermarket, we're going to tax unrealized capital gains, we're going to pair up the world.
Carolina Jolly: That again, please I lost the last you can remind me what you remind you of what what what's kind of happening in that the hardware part of the business.
Carolina Jolly: In the area that might be a little more sluggish.
Carolina Jolly: Oh, you mean, it quite well well I dunno cooking with whats going gangbusters for a long time, that's under car equipment, it's like a liners in collision equipment and lifts in those kinds of things and some of those product characters or uplifts happened to be up a little bit, but but in general. These are capital license expansion capital like expansions in a garage you know they're fairly big ticket item.
Speaker Change: Welcome to the MadHatter's Tea Party. Nobody knows what actually is going to happen. So you can't even make it up a pronouncement.
Speaker Change: Each of these could be, you know, we want to rate a corporate tag. Each of these could be attenuating or not. It really depends on the details. I don't think you can discern anything from what these guys have been saying. Of course, if they care of everything in the world, that's probably, you know, it'll take some adjustment for that. It'll take some adjustment for sure. But, you know, maybe it helps people who sell in the markets where they produce. Sometimes that can happen over time. But boy, I tell you what, that's a torturous set of assumptions you have to make to come to any conclusion about which person would be best or would help us or hurt us. Okay, great. Thank you.
Carolina Jolly: And they are sold through direct and through distributors to the actual repair shop owner and manager.
Carolina Jolly: And what we're seeing here is a little back off and add to some of it can be associated with the macro environment.
Carolina Jolly: Some of it could be saying hey.
Carolina Jolly: Or do I want to install something now and finance it at this level when the fed is going to keep dropping interest rates by 50 point increments. So maybe I'll wait a little while so I reports a little bit like that that people are saying I need to I need to put new stuff in because of the complexity of the new vehicles need changes to come.
Speaker Change: The next question is from Carolina Jolly with Cabelli, please go ahead.
To manage it just I want to wait a little bit now on top of that on top of that you would say that cdk's disruption and some of our people do say this cdk's disruption in the quarter.
Speaker Change: Hi, thank you for taking my question. So it sounds like within our tonight software and diagnostic the higher margin business is doing well. But can you remind me what's kind of happening in terms of the hardware and that business?
Carolina Jolly: Turn.
Carolina Jolly: Dealerships I think they were at 40% of the dealerships turn dealership attention away from saying, adding a lift or a liner to just trying to stay at their head above water, while it didn't have a computer system.
Speaker Change: I can't please, I lost the left, you can remind me what you remind you of what kind of happening in the hardware part of the business
Speaker Change: Up.
Speaker Change: the area that might be a little more sluggish.
Some of that probably was in the quarter, it's hard to really document that and I don't know how much. It was but that was certainly that wasn't a favorable event for us that happened in the quarter I'm trying to hang the reduction on that but that's piled on top of the uncertainty. So that's what's happening and we would think though that we kind of think this is shorter term.
Speaker Change: Oh, you mean equipment? Well, look, I don't know, equipment was always on gang buses for a long time. That's under car equipment. It's like a liners and collision equipment and lifts and those kinds of things. And some of those product characters are about lifts happen to be up a little bit. But in general, these are capital-like expansions, capital-like expansions in a garage, you know. They're fairly big to get items in. They're sold through direct and through distributors to the actual repair shop owner and manager. And what we're seeing here is a little back off and add to you. Some of it can be associated with the macro environment. [inaudible]
Carolina Jolly: Term than let's say the technicians worries you know a little bit a little bit more solvable. It probably gets solvable, but it may be some somewhat by the election, maybe somewhat by by by interest rates being more definitive and the technicians more talking about broad bad news for breakfast things like Okay. Two wars.
Speaker Change: Some of it could be saying, hey, I don't know, do I want to install something now and finance to that this level when the feds are going to keep dropping interest rates by 50 point increments? And maybe I'll wait a little while. So our report's a little bit like that that people are saying, I need to put new stuff in because the complexity of the new vehicles need changes to manage it just. I want to wait a little bit. Now, on top of that, on top of that, you would say that CDK's disruption, and some of our people do say this, CDK's disruption in a quarter.
Carolina Jolly: Orders lousy everything seems to be crashing down and I'm not saying, we don't know what's going to happen to 15 weeks.
Carolina Jolly: After 15 weeks a little bit different.
Carolina Jolly: Thank you.
Carolina Jolly: Sure.
Speaker Change: This concludes our question and answer session I would now.
Speaker Change: I'd to turn the conference back over to Cerro verbs ski for any closing remarks.
Speaker Change: Thank you all for joining us today, a replay of this call will be available shortly on snap on dot com as always we appreciate your interest in snap on good day.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Turned dealerships, I think there were 40% of the dealerships turn dealership attention away from saying adding a lift or a liner to just trying to stay their head above water while they didn't have a computer system. So some of that probably was in the quarter. It's hard to really document that and I don't know how much it was, but that wasn't a favorable event for us that happened in the quarter. I'm trying to hang the reduction on that, but that piled on top of the uncertainty. So that's what's happening, and we would think though that we kind of think this is shorter term than say the technicians.
Speaker Change: Warriors, you know, a little bit, a little bit more solvable. It probably gets solvable, but it may be some, some of my election, and it may be somewhat by, by, by interest rates being more definitive. And the technicians, you're more talking about blood, bad news for breakfast, things like, okay, two wars, you know, the board is lousy. Everything seems to be crashing down on her, saying, we don't know what's going to happen in 15 weeks.
Speaker Change: After 15 weeks, a little bit different.
Speaker Change: Thank you.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Sara Verbsky for any closing remarks.
Sara Verbsky: Thank you all for joining us today. A replay of this call will be available shortly on snap-on.com. As always, we appreciate your interest in snap-on. Good day.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: Episode 2
Speaker Change: Good morning and welcome to the Snap-On Incorporated 2024 3rd Quarter Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded.
Speaker Change: I would now return to the conference over to Sara Verbsky, Vice President and Vesta Relations. Please go ahead.
Sara Verbsky: Thank you, Gary, and good morning everyone. We appreciate you joining us today as we review snap-ons third quarter results, which are detailed in our press release issued earlier this morning. We have on the call Nick Pinchuk, snap-ons chief executive officer, and Aldo Pagliari, snap-ons chief financial officer.
Sara Verbsky: Nick will kick off our call this morning with his perspective on our performance.
Sara Verbsky: will then provide a more detailed review of our financial results. After Nick provides some closing thoughts, we'll take your questions. As usual, we've provided slides to supplement our discussion.
Sara Verbsky: These slides can be accessed under the Download tab in the webcast your, as well as on our website, tap on.com under the Investors section.
Sara Verbsky: These slides will be archived on our website along with the transcript of today's call. Any statements may during this call relative to management's expectations, estimates or beliefs, or that otherwise discussed management's or the company's outlook plans or projections are forward-looking statements, and actual results may differ materially from those made in such statements.
Sara Verbsky: Additional information and the factors that could cause our results to differ materially from those in the forward-looking statements are contained in our SEC filings. Finally, this presentation includes non-get measures of financial performance, which are not meant to be considered in isolation or as a substitute for their gap counterparts. Additional information regarding these measures is included in our earnings release issue today, which can be found on our website. With that said, I'd now like to turn the call over to Nick Pinchuk, Nick. Thank you.
Nick Pinchuk: Thanks, Sara!
Nick Pinchuk: Morning, everyone.
Nick Pinchuk: As usual, I'll start with the highlights of our third quarter. I'll provide my perspective on the results.
Nick Pinchuk: Market on our path ahead. After that, I will give you a detailed review of the financials.
Nick Pinchuk: My perspective.
Nick Pinchuk: I am encouraged. And we believe our third quarter was encouraging another period of broad property billy growth and significant org progress. Product and process success and clear traction on our tools group pivot to quick paybacks.
Nick Pinchuk: Of course, the court again had its challenges on going macro preach, pressures creating obstacles of uncertainty, just like we've encountered before, but in the end.
Nick Pinchuk: We adjusted, withstood the turbulence, took advantage of the opportunity and drove another strong earnings performance, and all of that is written clearly across the results.
Nick Pinchuk: is the R.
Nick Pinchuk: 3rd quarter sales of $1,147,000,000 were slightly down from the $1,159.3 million recorded last year. On our organic basis, excluding $200,000, an unfavorable foreign currency translation and $7.2 million from acquisitions, our organic sales were lowered by 1.7%. But the op-go operating income was up, and the OI margin was 22% up 80 basis points, setting a new benchmark for our 3rd quarters.
Nick Pinchuk: for financial services, the OI-571.7 million, and that's up to 60 from the 59.4 million over of 2023. A number that, when combined with our Opco Result, raised our consolidated OI margin to 26 percent. Up 90 basis points from last year's 25.1, and EPS.
Nick Pinchuk: It was $4.77.
Nick Pinchuk: A night's game for last year's 4th I was at 51 cents.
Nick Pinchuk: So those are the overall results, marked by operating capability, structural bounds, and consistent resilience, prevailing against significant heads.
Nick Pinchuk: Now let's take a view of the market.
Nick Pinchuk: and third quarter automotive repair remain robust. It continued to expand and complexity. New model centers the market, unveiling a rule out of new drive trains, motor configurations, and high tech elective assistance that control the neural network of sensors, woven together that enable driver assistance vehicle autonomy.
Nick Pinchuk: All of it housed in modern chassis, fashions out of space-age materials. And it's complicated sophisticated advancements, combines with an aging car park. You know what now we have just 12.6 years to make fixing vehicles even more challenging.
Nick Pinchuk: If you're from Snap-On
Nick Pinchuk: This is music to your ears, and the hips just keep on coming, creating opportunities for years to come.
Nick Pinchuk: Let's talk about organizations, the OEM, the dealerships, the independent garage, the segment that primarily focuses on infrastructure, a type investment.
Nick Pinchuk: Recover, you know, things like renovating beige and upgrading repair equipment, meeting the challenges of new vehicle models and expanding shop capacities to match the rise of repair work, driven by the ongoing increase in vehicle complexity.
Nick Pinchuk: New List to support the extra weight of battery systems. So just to get an undercar equipment to calibrate the driver's system that enables vehicle automation.
Nick Pinchuk: and more powerful software suit, for managing parts from service space and customer interfaces, and hands vehicle communication devices to interact with the more complex design, and more powerful repair information database to read, to diagnose and to fix the vehicles of the now and of the future.
Nick Pinchuk: Our parents from Asian Group are our tonight tribes in this world, the complexity. Serving repair shop owners and managers delivering solutions that make the full repair path much easier, paving the way forward with innovative, dealership management systems, proprietary one of a kind intelligent diagnosis platforms, and the full array of an array of capable shop equipment.
Nick Pinchuk: Now the opportunities for the garage is strong, but uncertain interest rates, rumors of packed changes, and worries over the elections are all weighing on investment decisions, creating a mixed landscape across the market, but the overall outlook still remains quite positive, and we believe that snap on an R10I are placed to participate fully in the abundant opportunity.
Nick Pinchuk: Now let's do a...
Nick Pinchuk: the Technician Market.
Nick Pinchuk: is the fox who...
Nick Pinchuk: The Cypher, the data, touch the screen, diagnose the promise, pour all the wrenches and wheeled or extraordinary skills to execute repair. It's where our men network plies and strays.
Nick Pinchuk: You know, in that regard, the third quarter is always a great time for me because just when we hold our annual snap-on-one franchisee competency or SFC, it's a gathering of men and women who drive the van and call on hundreds of thousands of pecks.
Nick Pinchuk: Every week.
Nick Pinchuk: It's an unmatched connection to the world of vehicle repair.
Nick Pinchuk: You know, again this year I had extended conversations with dozens and dozens of our franchisees and each encounter, each encounter resonated with enthusiasm. We say snap on profiles and turbulence and proceeds with confidence and the franchisees know it's true.
Nick Pinchuk: Now, with that said, the micro environment is still weighing on our technician customers, with considerable uncertainty driven by the election and it's perceived impact. The fears of ongoing over inflation inflation by border pressure and by the specter of prolonged wars.
Nick Pinchuk: The shops are full, tech wages are up, the hours are expanding, and the demand for tech continues. You're in a cash.
Nick Pinchuk: but they're still confidence poor. The bad news they get every day for breakfast is weighing in on them.
Nick Pinchuk: Right now they're hesitant on the future, and as such, they're reluctant on big-ticket items and longer-pray pay-backs, sort of a comedy. The tools group continues to pivot, focusing on shorter pay-back items to match the technicians current preferences, and the third quarter results can firm that it's working.
Nick Pinchuk: So we believe the automotive repair market is robust.
Nick Pinchuk: Kerenon's certainty now is standing. It's a great place to operate.
Nick Pinchuk: now it's turn to the critical inderges with a penty for failure ti this is where our commercial industrial a group or our ci makes its living its' challenging workgan environments like oil platform' mining site and battlefield but it also includes sensitive and sophisticate atmosphere needed to manufacture computer chips to build their plane and to launch rockets the customers in this segment in the segment or organization' big and small
Speaker Change: and they're more influenced by the data than the text, interest rates, GDP, and industry demand. And as such, these seconds are of pretty positive.
Speaker Change: and we see it in the results, growth and aviation in defense, in general industries, and sectors that need our precision towards the advice, the execute and document accuracy, and the areas enabled by our custom kits, packages that meet the specific needs of the tasks that improve quality productivity and safety, in other words, solutions that are right up our alleys.
Speaker Change: This is also the signal where our largest international present is, and the concept of clenching, it's the segment with the headwinds of a geopolitical turd Elizabeth. And I regard Europe continues to vary region by region, the South-Many's positive.
Speaker Change: But several countries, particularly in a northern dealing with difficulty in some cases, technical recessions.
Speaker Change: and in Asia, it's also mixed. China is still recovering from the pandemic and the effects of the extended lockdown. At the same time, Korea and Japan are resilient. A resilient, so there are geographical, geographical challenges in the critical industries, but overall.
Speaker Change: This market is positive, but Pinchuk is considerable, and we believe we are well positioned to capitalize on these possibilities.