Q1 2025 Snap-on Inc Earnings Call
Event is being recorded.
Sara Verbsky: I would now like to turn the conference over to Sara Verbsky, Vice President of Investor Relations. Please go ahead, ma'am. Thank you, Nick, and good morning, everyone. We appreciate you joining us today as we review Snap-On's first quarter results, which are detailed in our press release issued earlier this morning.
I would now like to turn the conference over to use there Sara <unk> Vice President of Investor Relations. Please go ahead ma'am.
Speaker Change: Thank you Nick and good morning, everyone. We appreciate you joining us today as we review snap On's first 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 Cagliari Snap ons, Chief Financial Officer, Nick will kick off our call. This morning with his perspective.
Sara Verbsky: We have on the call Nick Pinchuk, Snap-On's Chief Executive Officer, and Aldo Pagliari, Snap-On's Chief Financial Officer. Nick will kick off our call this morning with his perspective on our performance. Aldo will then provide a more detailed review of our financial results. After Nick provides some closing thoughts, we'll take your questions.
Speaker Change: On our performance, although 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 snap on dot com under the investors section.
Sara Verbsky: 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, snap-on.com, under the Investor section. These slides will be archived on our website, along with a transcript of today's call.
Speaker Change: These slides will be archived on our website along with a transcript of today's call any statements made during this call relative to management's expectations estimates or beliefs are that otherwise discuss 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.
Sara Verbsky: Any statements made during this call relative to management's expectations, estimates, or beliefs, or that otherwise discuss 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 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-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, which can be found on our website.
Speaker Change: <unk> 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-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.
Speaker Change: Please issued today, which can be found on our website with that said I'd now like to turn the call over to Nick Pinchuk Nick.
Nick Pinchuk: With that said, I'd now like to turn the call over to Nick Pinchuk. Thanks, Sara. Good morning, everybody.
Nick Pinchuk: Thanks, Sara good morning, everybody.
Nick Pinchuk: As usual, I'll start by covering the first quarter, and along the way I'll give you my perspective on our results, our markets, the current environment, our position in the turbulence, how we're engaging the situation, and the outlook for the future. What we think it all means going forward.
Nick Pinchuk: As usual I'll start by covering the first quarter and along the way I'll give you my perspective on our results our markets. The current environment our position in the turbulence, our engaging the situations and the.
Nick Pinchuk: What do you think at all means going forward.
Nick Pinchuk: and Aldo will move on to a more detailed review of the financials. Wow. You know, these are I don't think we've seen an interlude so packed with economic news. Government shake-ups, tariff bursts, the administration declaring that there's likely to be pain before the Renaissance emerges. I mean, the hits just keep on coming. You can see that uncertainty, though, in a more formal way in the Consumer Sentiment Index. It dropped precipitously, decreasing by 30 percent just since December. The second lowest rating ever. And it particularly impacted the perspective of our grassroots economy, like our technician customers.
Speaker Change: Aldo will move onto a more detailed review of the financials.
Nick Pinchuk: Wow.
Speaker Change: These are interesting times.
Nick Pinchuk: I don't think we've seen it in the loop.
Nick Pinchuk: So packed with economic news government Jacobs <unk> first the administration declaring that there is likely to be pain before the Renaissance emerges I mean, the hits just keep on common.
Nick Pinchuk: You can see that uncertainty, though in a more formal way and the consumer sentiment index. It dropped precipitously decreasing by 30% just since December.
Nick Pinchuk: The second lowest rating ever.
Nick Pinchuk: And it particularly impacted the prospective our grassroots economy like our technician customers. It prompted an avoidance of longer payback finance items that that outran the tools group pivoting the quicker payback products. It created a pause in our upward trajectory that is visible in the quarters numbers our sales of one.
Nick Pinchuk: It prompted an avoidance of longer payback finance items that outran the tools group pivoting to quicker payback products. It created the pause in our upward trajectory that's visible in the quarter's numbers. Our sales of $1,141.1 million, as reported, represented a 3.5% decline, including $13.9 million in unfavorable foreign currency translation and organic sales that were down low single digits, 2.3%, on mixed results across the operating market. Operating income for the quarter was $243.1 million, and that compared to $270.9 million in 2020-2024. OI margin was 21.3 percent, and that was versus last year's 22.9 percent, which, you know, I remind you, included 90 basis points associated with a benefit from the 2024 legal win.
Nick Pinchuk: Billion $141 1 million as reported represented a three 5% decline in corn.
Nick Pinchuk: And including $13 9 million unfavorable foreign currency translation and organic sales that were down low single digits to 3% on mixed results across the operating groups.
Nick Pinchuk: Operating income for the quarter was $243 1 million and that compared to $270 9 million. In 2000, 2024, Oi margin was 21, 3% and that was versus last year's 22, 9%, which I remind you included 90 basis points associated with a benefit from the 2024 legal win now notably.
Nick Pinchuk: The gross margin was 50.7%, up 20 basis points, despite the reduced volume. Our OI margin gap reflected the fact that we kept spending on maintaining and strengthening our advances in product and brand and in people, believing as we did in the pandemic. that it's best to emerge from turbulence at full strength.
Nick Pinchuk: The gross margin was 57% up 20 basis points.
Nick Pinchuk: Despite the reduced volume and affect our.
Nick Pinchuk: Our Oi margin gap reflected the fact that we kept spending on maintaining and strengthening our advances in product and brand and people, believing as we did in a pandemic.
Nick Pinchuk: Thats best to emerge from turbulence at full strength.
Nick Pinchuk: And we plan to do just that. For financial services, operating earnings of $70.3 million were up 2.9% from last year. Still, you know, from last year's $68.3 million. So as reported OI margins in the quarter, including both financial services and OPCO, were 25.2% versus the 26.5% recorded last year. Quarterly EPS was $4.51, was down $0.40, which reflected the lower volume, and 16% from last year's legal payment and $0.09 in higher pension amortization costs included in the 2025 number.
Nick Pinchuk: And we plan to do just that.
Nick Pinchuk: For financial services operating earnings of <unk> of.
Nick Pinchuk: Of $70 $3 million were up.
Nick Pinchuk: Two 9% from last year still.
Nick Pinchuk: From last year's $68 3 million. So so as reported Oi margins in the quarter, including both financial services and Opco or 25, 2% versus the 26, 5% recorded last year quarterly EPS was $4 51.
Nick Pinchuk: It was down 40, which reflected the lower volume.
Nick Pinchuk: And 16% from last year's legal payment and <unk> and higher pension amortization costs included in the 2025 number.
Nick Pinchuk: So now, let's talk about the mark. We believe auto repair is quite critical. It remains strong, continues to be a great place to operate. And the industry metrics agree. Now some people have pointed out that hours worked are down over the last couple of months and that's true, but there's positive news almost everywhere else. The U.S. car park, on average, is 12.6 years old, and it's getting old, it's old now, and it's getting older. Household spending on repairs, on repairs, on car repairs, are up substantially, both year over year and over the trailing 12 months.
Nick Pinchuk: So now let's talk about the markets.
Nick Pinchuk: We believe auto repairs quite critical it remains strong and continues to be a great place to operate and the industry metrics agree that's.
Nick Pinchuk: Some people have pointed out that hours worked are down over the last couple of months and that is true, but there is positive news almost everywhere else.
Car Park on average is 12 six years old and if you didn't know it's old now and it's getting older household spending on repairs on repairs on car repairs are up substantially both year over year and over the trailing 12 months and tech wages continue to rise nicely.
Nick Pinchuk: And tech wages continue to rise nicely, you know, mid-single digits. Having said that The techs, the technicians are among those who are daunted by the current turbulence. You know, many of them believe we're going to a more positive. But they fear the economy will careen off the rails before we get there. Those people who work are part of the broad group driving the drop in consumer sentiment. But even though they're now cash rich, they fear they don't have the financial cushion for an off-the-rails event as such. And as such, they're reluctant to embrace finance profit.
Nick Pinchuk: Mid single digits.
Nick Pinchuk: Now having said that.
Nick Pinchuk: The tax the technicians are among those who are daunted by the current turbulence.
Nick Pinchuk: Many of them believe we're going to have more positive place.
Nick Pinchuk: But.
Nick Pinchuk: Fear the economy will careen off the rails before we get there.
Nick Pinchuk: Those people to work are part of the broad group driving the drop in consumer sentiment, but even those are now cash rich they feel they don't have the financial cushion for an off the rails event as such and as such they are reluctant to embrace financed products items like tool storage boxes are top of the line diagnostics, we can see a clear.
Nick Pinchuk: Items like tool storage boxes or top-of-the-line diagnostics, we can see it clearly in the double-digit drop in our credit company origination.
Nick Pinchuk: Early in the double digit drop in our credit company originations.
Nick Pinchuk: on the other. We do believe that the techs, though confidence poor, still have an interest in quicker payback items that makes their work easier. You know, they want to make more money. So our tools group will keep pivoting to match the current preferences, working with perseverance. with focus and with confidence to restore that group's advance in closing its sales graph, just like it had established last year.
Nick Pinchuk: On the other hand.
Nick Pinchuk: We do believe that the textile confidence poor still have an interest in quicker payback items that makes the work easier and I didn't want to make more money. So our our tools group. Okay. We'll keep pivoting to match the current purpose PREPA the preferences working with.
Nick Pinchuk: Perseverance.
Nick Pinchuk: With focus and with confidence to restore that group's advance in closing its sales graph just like in an established last year. So.
Nick Pinchuk: So that's the tech sector. But also on vehicle repair, we have independent shops and OEM dealerships, approximate but distinct segments from the techs. That's the market of RS&I. The garages, those people there, continue to tool up with the latest equipment and diagnostic systems, meeting the needs of their customers, getting them back on the road quickly. They know they have to invest. They know they need innovative new products, hardware and software that improve efficiency, repair efficiency and accuracy. It's an imperative to match the repair complexities of today's sophisticated and technically advanced vehicles. It's table stakes for them in the world of today, and the repair shop owners and managers will keep moving in that direction.
Nick Pinchuk: That's the vehicle that's the text that's the tech sector, but also in vehicle repair we have independent shops in OEM dealerships approximate but distinct segments segment from the tech. So that's that's the market of our F&I.
Nick Pinchuk: The garage is those people there continue to tool up with the latest equipment and diagnostic systems meeting the needs of the customers getting them back on the road quickly. They know they have to invest they know they need innovative new product hardware and software hardware and software that improve improve efficiency repair efficiency and accuracy. It's an imperative it's in it.
Nick Pinchuk: <unk>.
Nick Pinchuk: To match the repair complexity of today's sophisticated and technically advanced vehicles, it's table stakes for them and for everybody in the world today, and the repair shop owners and managers will keep moving in that direction.
Nick Pinchuk: Another opportunity in the market we've... And we've we've focused on is critical industries. We've termed the market critical industry sectors like natural resources, the military, aviation, heavy duty fleets, where the penalty for failure is high. This is where CNI makes its money. We're offering custom solutions to reach new operations and make their critical work easier. Of course, you know, like everything, we see period-to-period challenges and variations across geographies and across segments, particularly in this time. And in the first quarter, we did see the usual pause in military business that almost always temporarily accompanies a new sheriff in the Defense Department.
Nick Pinchuk: Another another opportunity in the markets.
Nick Pinchuk: In the market we've.
Nick Pinchuk: We've focused on is <unk>.
Nick Pinchuk: Critical industries, we've termed the market critical industries sectors like natural resources, the military aviation heavy duty fleets, where the penalty for failure is high this is where C&I makes its money, where we're offering custom solutions to reach new operations and make their critical work easier.
Nick Pinchuk: Of course, you know like everything we see period to period challenges.
Nick Pinchuk: And variations across geographies and across segments, particularly in this time and in the first quarter. We did see the usual pause in military business are almost always are temporarily.
Speaker Change: Companies, a new sheriff in the Defense Department.
Nick Pinchuk: After, but after a period of, after a period of dysfunction, however, the warfighters went out and the process gets back on track. But in general, this is a robust arena.
Nick Pinchuk: But after a period after a period of dysfunction. However.
Nick Pinchuk: The Warfighters went out in the process gets back on track.
Nick Pinchuk: But in general this is a robust arena and we believe the critical industries are an hour in a place of abundant opportunity and we believe we're growing stronger in that arena every day connecting with more customers using the insight to expand our product line and extend our presence wider and deeper so overall I.
Nick Pinchuk: And we believe the critical industries are in a place of abundant opportunity. And we believe we're growing stronger in that arena every day, connecting with more customers, using the insight to expand our product line and extend our presence wider and So overall, I describe our markets as continuing to offer Of course, this is an environment where challenges do exist, and there is turbulence, but we are confident that with our advantages in our strengthening product lines that solve critical challenges and our extraordinary brand that literally defines a professional and our very experienced team that's so enabled we believe will prevail against these challenges.
Nick Pinchuk: Our market says.
Nick Pinchuk: Continuing to offer opportunities.
Nick Pinchuk: Of course, this is an environment where challenges do exist and there is turbulence, but we are confident.
Nick Pinchuk: With our advantages and our strengthening product lines that solve critical challenges and our extraordinary brand that literally defines a professional and our very experienced team.
Nick Pinchuk: That so enabled we believe will will prevail against these challenges.
Nick Pinchuk: Now! Let's briefly address the issue of the day. Tara. A word that was mentioned last Friday in the Wall Street Journal 254 times. Yesterday was down to a mere 163 men. Paraphrasing Klaus Schwitz, the world is in a fog of terror. a time in which there are so many changing variables that it's difficult to see the way forward. It's an environment that will require urgent action to adjust, to optimize, and to take advantage. And we're confident in that fog. We are of course not immune to the challenge of tariffs. But we believe Snap-On is greatly advantaged by our manufacturing strategy to make in the markets where we sell and enable quick adjustment to the changing production landscapes that are likely to happen.
Nick Pinchuk: Now.
Nick Pinchuk: Now.
Nick Pinchuk: Let's briefly address the issue of the day.
Nick Pinchuk: Tariffs.
Speaker Change: But one that was mentioned last Friday, and the Wall Street Journal 254 times yesterday was down to a mere 163 mentions.
Nick Pinchuk: Perforating, Clos, which the world isn't a flag of tariffs.
Nick Pinchuk: A time in which there are so many changing variables that it's difficult to see the way forward. It is an environment that will require urgent action to adjust to optimize that and take advantage and we're confident in that fog.
Nick Pinchuk: We are of course, not immune to the challenges of tariffs, but we believe snap on is greatly advantaged by our manufacturing strategy to make in the markets, where we sell and enable quick adjustment to the changing production landscapes that are likely to happen.
Nick Pinchuk: You know We already have the facility. 36 factories around the world, 15 right here in the USA, many of which we've just expanded. were positioned well with American products. Our major product lines are already made in America using American steel, and our US plants already produce some version of almost all our product lines. What that means is no extended ramp-ups for relocated products. We already have the resident know-how right here in the USA. And for the select places in America, where we use some high tariff components, we have 21 factories outside the U.S. sourcing activities in several locations, and that gives us access to a myriad of alternative sources.
Nick Pinchuk: We already have the facilities.
Nick Pinchuk: 36 factories around the World 15, right here in the USA many of which we've just expanded.
Nick Pinchuk: We're positioned well with American products.
Nick Pinchuk: Our major product lines are already made in America, using American steel and our U S plants already produce some version of almost all our product lines. What that means is no extended ramp ups for relocated products. We already have the resident knowhow right here in the USA.
Nick Pinchuk: And for the select rates placed in America, where we use some high tariff components, we have 21 factories outside the U S sourcing activities and civil location and that gives us access to a myriad of alternatives alternative sources. Finally skilled America workers, you know one of the barriers to.
Nick Pinchuk: Finally, skilled American workers, you know, one of the barriers to reassuring us or reacting to tariffs is skilled American workers are in short supply. The National Association of Manufacturers, after all, says there are 500,000 openings in U.S. manufacturing right now. We haven't had a difficult in filling position. And we believe we can continue to do just that in the future.
Nick Pinchuk: <unk> are reacting to the tariffs skilled American workers are in short supply.
Speaker Change: The National Association of manufacturers. After all says there are 400, there are 500000 openings in U S manufacturing right now.
But we haven't had difficulty in filling positions.
Speaker Change: And we believe we can we can continue to do just that in the future.
Nick Pinchuk: So we're in the flag of tariff. But we are confident and we believe we can engage and manage a turbulence. We're not immune to the impact, but we believe we are very advanced.
Speaker Change: So we're in the flag of tariffs.
Speaker Change: But we are confident and we believe we can engage and manage the turbulence, we're not immune to the impact, but we believe we are very advantaged.
Nick Pinchuk: Now let's move to the segment. In the C&I group, Organic sales decreased by 2.9%, low single digits. C&I's operating income was $53.2 million, below the 2024 levels by $2.2 million. But operating margins were 15.5%, a new first quarter record, up 10 basis points from last year. First quarter, remember, is always... Seasonally, kind of weaker for cyanide. In effect, though, if you think about the, this is the key point, gross margin for C&I, gross margin for C&I in the period were 42.6%, up 180 basis. Yes, 180 basis points. In effect, we continued OE investments to expand our advantages despite the lower volume, and it was a well considered offset to gross margin gains, but we believe it was worth it.
Speaker Change: Now, let's move to the segments.
Speaker Change: In the C&I group organic sales decreased by two 9% low single digit C&I operating income was $53 2 million below the 2024 levels by 2.2 million, but operating margins were 15, 5% a new first quarter record up 10 basis points from last year first quarter remember as always.
Speaker Change: Seasonally kind of weaker for C&I.
Speaker Change: In effect. So if you think about the.
Speaker Change: This is the key point gross margin for C&I gross margin and C&I in the period were 42, 6% up 180 basis points.
Speaker Change: Yes, 180 basis points in effect, we continued OE investments to expand our advantage and despite the lower volume and it was a well considered offset to gross margin gains, but we believe it was worth it.
Nick Pinchuk: We're confident in and committed to extending in critical industries, and we'll keep strengthening our position with C&I as we move forward, observing the task and using those insights to design products that make work easier all across critical industries.
Speaker Change: We're confident in and committed to extending in critical industries, and we'll keep strengthening our position with C&I as we move forward observing the tasks and using those insights to design products that make work easier all across critical industries, you can see that in our torque lineup, where precision and accuracy of essential <unk>.
Nick Pinchuk: You can see that in our torque lineup, where precision and accuracy are essential. The aviation market, where the penalty for failure is high, continues to adapt our control tech branches, or what we call the C-Tech, made in the USA, built in our plant located in the city of Minnesota, California. It's an expanding presence in aviation, covering a wide range of sizes, each specifically matched to a unique task. Aerospace makers and fixers love this product for its quality and accuracy, but the big kahuna is its ability to document the force applied to the fastener, wirelessly creating a record that a sensitive task has been completed just as specified.
Speaker Change: Market, where penalty from failed we're dependent live here in July.
Speaker Change: Continues to adapt our control Tec wrenches or or what we call. The C Tech made in USA.
Speaker Change: In our plant located in city of industry, California, It's an expanding forever.
Speaker Change: <unk> aviation covering a wide range of sizes. Each specifically match do we unique test aerospace makers and fixtures love these products for its quality and accuracy, but the big Kahuna is its ability to document the force applied to the fastener wirelessly, creating a record.
Speaker Change: The sensitive task has been completed just specified.
Nick Pinchuk: Now, you know, as we recently learned, this is pretty important where aircraft are involved. It's one of the reasons why it's still strong a product. Our Carroll Stream facility in Illinois produces an elite line-up of preset torque wrenches and wireless controllers. Devices that excel in any production operation, wear-proofing, reducing rework, decreasing warranty needs, and just raising customer satisfaction are vital. Actually, it's pretty much everywhere the operation is critical. So our SR controls link with the manufacturer's internal system, and they relay engineering protocols directly to the shop floor operator, identifying the right tool, confirming the test is complete and correct, storing the record, all to ensure that the right specs were applied and make sure nothing leaves the line without being fully correct.
Speaker Change: As we recently learned this is a pretty important it has been pretty important where aircraft are involved.
Speaker Change: One of the reasons why it's still strong abroad.
Speaker Change: And our Carol stream facility.
Speaker Change: Illinois produces an elite lineup of preset torque wrenches in wireless control our controllers.
Speaker Change: On devices that excel in any production operation where are approving reducing net reducing rework decreasing warranty just raising customer satisfaction are vital actually it's pretty much everywhere. The operations is critical so our ESR controls linked with the manufacturers' internal system and they relay engineering protocols directly for the shop floor, operator, identifying the right tool confirming.
Speaker Change: The past is complete and correct storing the record all to ensure that the right specs were applied and make sure nothing leaves the line without being fully correct.
Nick Pinchuk: And our newly expanded Kenosha facility, another one of our expansions in the United States, C&I, the C&I custom tool department makes the very difficult process. A recent example is the aviation maintenance operation, an aviation maintenance operation that required a one-of-a-kind, abnormally long, three-inch spline socket to effectively access a very tight area in an exceptionally high-performance wing structure. Now, this is not an easy tool to make or to come by, but our customer product team in Kenosha designed it, tested it, and put it into the customer hands, all in quick time, making that critical task easier with insight and speed that's only enabled by an operation close to the customer.
Speaker Change: And our newly expanded Kenosha facility another one of our expansions in the United States C&I.
Speaker Change: The C&I.
Speaker Change: Custom tool department makes the very difficult possible.
Speaker Change: A recent example is the aviation maintenance operation and aviation maintenance operation are required a one of a kind abnormally long three inch supply soccer to effectively access a very tight area at an exceptionally high performance wing wing structure. Now this is not an easy tool to make or to come by but our customer product team in Kenosha designed tested and.
Speaker Change: Put it in our customer hands, all in quick time, making that that critical tasks easier with inside and speed. That's only enabled by an operation close to the customer.
Nick Pinchuk: that only such an operation close to the customer can achieve.
Speaker Change: That only such an operation closer to the customer can achieve.
Nick Pinchuk: In Murphy, North Carolina, our power tool plant launched a new combination set that was quite well-received. The stardust set was our PH3050B series air hammer that really packs a punch. Hitting with unwavering force, tackling heavy-duty repairs with power and speed, 2,500 blows per minute, our specially hardened piston strikes the chisel with enough force and kinetic energy to dislodge even the most stubborn components. But the coolest part of the design is the special Kevlar disk inside the hammer's body. Absorbing the shock, dramatically softening the vibration, making it more ergonomic, much easier and more comfortable for the operator, no more jackhammer joints.
Speaker Change: In Murphy North Carolina, our power tool plan launched a new combination set that was quite well received thus far to set was our ph 30, 50, B series Air Hammer that really packs a punch.
Speaker Change: Hitting with unwavering forest tackling heavy duty repairs with power and speed 2500 bluish per minute or specialty hardened piston strikes the chisel with enough force of kinetic energy to dislodge even though most stubborn components, but the coolest part of the design is the special Kevlar do inside the hammers body.
Speaker Change: Absorb the shock dramatically softening the vibration, making it more accurate ergonomic much easier and more comfortable with the operator, no more Jack camera joints.
Nick Pinchuk: Now in the, now in the item set, that beast hammer is paired with our most popular air chisels, hot forks for durability in our Elizabethan, Tennessee plant and kitted into a foam pallet for easy storage. It's a great package and the techs know it.
Speaker Change: No.
Speaker Change: Now in items said that beef cameras paired with our most popular air chisels are.
Speaker Change: Sports for durability in our Elizabethton, Tennessee plant and turned it into a phone powered for easy storage, it's a great package and the techs Noah.
Nick Pinchuk: So that's CNI, a high in first quarter profit margins, delivering solutions that make work easier, make work safer, and easier, and more productive. All enabled by American Plan.
Speaker Change: So that is C&I.
Speaker Change: High in first quarter profit margins delivering solutions that make work easier make work safer and easier and more productive.
Speaker Change: All enabled by American plants.
Nick Pinchuk: Now on to the tools group. Organic sales were down 6.8%. with a high single-digit decline in the U.S., partially upset by low single-digit gain internationally.
Speaker Change: Now onto the tools group organic schools organic sales were down.
Speaker Change: Six 8%.
Speaker Change: With a high single digit decline in the U S, partially offset by low single digit gain internationally.
Nick Pinchuk: The difference between those markets, you notice, opportunity income of $92.4 million compared with the $117.3 million of 2024 with an operating margin of 20%. The tools group continued to see challenges with the technicians' sliding confidence, with greater hesitancy to purchase long payback items like large tool storage buckets or big ticket items in general. The pivot to faster payback items was gaining traction against the worry brought on by the ongoing wars, the border crisis, and the consistent inflation. But we believe the events of the first quarter drove down confidence at an accelerated rate. Outrunning the continuing progress of the group's pivot.
Speaker Change: So the difference between those markets.
Speaker Change: Opportunity income of $92 4 million compared with $117 3 million of 2024 with an operating margin of 20%.
Speaker Change: The tools group continued to see challenges with the technicians sliding confidence with greater hesitancy to purchase long payback items like large tool storage market or big ticket items in general.
Speaker Change: The pivot to faster payback items was gaining traction against against the worry brought on by the ongoing wars the border crisis and a consistent inflation.
Speaker Change: But we believe the events of the first quarter drove down competence in an accelerated rate.
Speaker Change: Outrunning, the continuing progress of the group of the group's pivot.
Nick Pinchuk: Our shift is powered by, by altered capacities and refocused marketing and promotion campaigns. And probably most important by the introduction of innovative new products that make immediate impact with a short-term payback. Products like Made in Snap-On factories, like our recently expanded Milwaukee, Wisconsin plant, bringing raw American steel into the back door, forging it into near-net shape, applying skill and know-how to harden and finish the steel into a final product. One example is our low-profile flank drive socket capacity, recently expanded, purposely built to navigate tight quarters, enabling the tech to beat the clock, beat the flat rate, and expedite the repair by maneuvering around instead of removing the object.
Speaker Change: Our shifts.
<unk> is powered by by altered capacities and refocused marketing and promotion campaigns and probably most importantly by the introduction of innovative new products that make immediate impact with a short term payback.
Speaker Change: Price like a maintenance snap on factories like our recently expanded Milwaukee, Wisconsin plant, bringing raw American steel entered a backdoor forging and into near net shape applying skill and knowhow to harden and finished the steel into a final product.
Speaker Change: One example is our low profile flank drive socket capacity recently expanded purposely built to navigate tight quarters, enabling the tech the beat the clock.
Speaker Change: The flat rate and expedite the repair by maneuvering around.
Speaker Change: Instead of removing obstacles.
Nick Pinchuk: to reach the fast. It's to get right around, it doesn't have to spend the time removing the obstacle. Once engaged, the patented design grips the bolt on flat and not on the corners, quickly removing the part with ease without debilitating damage to the points of the fastener. Quick payback items like our, other quick payback items like our Synergy 100-tooth Ratchet, Maynard Elizabethan Tennessee Forge, a design that's unprecedented for strong and easy operation in tight spaces. It's now been introduced for our entire range, including our challenging to make long-handled versions. This quarter, we put the Synergy together with an array of those low-profile sockets, a combination that offers increasing accessibility, versatility, and reliability, a powerful match.
Speaker Change: To reach the fastener.
Speaker Change: Yes, right around doesn't have to spend the time removing the obstacle.
Speaker Change: Once engaged the patented design grips the bolt on flat and not on the corners quickly removing the part with ease without debilitating damage to the points are the fastener quick payback items like our other quick payback items like our synergy 100, <unk> has made our elizabethton, Tennessee Board a design that is unprecedented for strong and easy opera.
<unk> in tight spaces. It's now been entered its now been introduced for our entire range, including our challenging to make a long handled versions. This quarter, we put the synergy together with an array of those low profile sockets, a combination that that offers increasing assess ability versatility and reliability of powerful Matt.
Nick Pinchuk: The shops have loved those quick payback sets, and they're right in the current preferences for the tech. And when technicians are bouncing from bay to bay, or job to job, they need versatility to make speedy adjustments and remove hardware. So another quick payback hit product was our lineup of adjustable wrenches made at our Elkmont, Alabama facility. It's the only American-made adjustable wrench on the market. It's a demonstration of U.S.-made flexibility, handling a wide range of different sized fasteners with just one tool. And you know, the kind of the cool part about this is the smaller models are easy to fit in your pocket.
Speaker Change: The shops are loved those quick payback sets and the right in the current preferences further tests and.
Speaker Change: And when technicians are bouncing from bay to bay or job to job they need versatility to make speedy adjustments and remove hardware. So another quick payback hit product was our lineup.
Speaker Change: Our lineup of adjustable wrench has made our <unk>, Alabama facility. It's the only American made adjustable wrench on the market. It's a demonstration of U S made flexibility handling a wide range of different sized fasteners with just one tool.
Speaker Change: The kind of the cool part about this is a smaller models are easy to fit in your pocket. So there always is already as you move from database.
Nick Pinchuk: So they're always ready as you move from bay to bay. and for customers needing to secure their tool investment. We released our latest additions to the roll cart lineup, our KHP-46. Now, this is at the bottom end of the bigger ticket items. It rolls out of our Algona, Iowa facility, and it provides a rugged and secured storage that's only 40 inches wide, making it easy to position right in the work area. But it's equipped with slides providing drawer capacity up to 240 pounds. That means it's a solid chassis that can hold everything necessary for positioning essential tools close to the workplace.
Speaker Change: And for customers needing to secure their tool investments, we released our latest additions to the role of card lineup. Our THP 46 now this is at the bottom end of the bigger ticket items.
Speaker Change: It rolls out of our El <unk> facility and it provides us a rugged and secured storage that that's only 40 inches wide, making it easier to position right and the work area, but it's it's equipped with slides, providing dror capacity up to 240 pounds.
Speaker Change: The solid chassis that can hold everything necessary for positioning essential tools close to the workplace. In addition, the units top department can be configured in multiple layouts for managing power tool and the interest. It has got an installed 120 volt outlet and USB port that allow all of Texas electronic electronic accessories in cordless batteries to be charge and be it.
Nick Pinchuk: In addition, the unit's top compartment can be configured in multiple layouts for managing power tools. And it's got an installed 120-volt outlet and USB port that allow all TEX electronic accessories and cordless batteries to be charged and be at the ready. The KHP-46, a roll card that's solid, mobile, with powerful features, a sturdy storage solutions with a quicker payback. It matches the needs of, you know, confidence-poor techs that require a storage upgrade now, and it is viable.
Speaker Change: They're ready.
Speaker Change: The <unk> 46, a roll cart that solid.
Speaker Change: Mobile with powerful features a sturdy shored solutions with a quicker payback it matches the needs of confidence poor tech that require storage upgrade now and it is popular.
Nick Pinchuk: Well, that's the tools group, armed with U.S. factories, vertically integrated, with the ability to speed designs and flexibility for pivoting to short payback items, determined to prevail in the turbulence.
Speaker Change: Well, that's the tools group armed with U S factories vertically integrated with the ability to speed designs and and flexibility for pivoting the short payback items determined.
Speaker Change: All of the turbulence now, let's move to our F&I sales in our first quarter 479, 475, 9 million with an organic gain of three 7% advancements in our diagnostics and Mitchell one operations and strong double digit improvements in our OEM markets operating earnings for <unk> were $122 1 million up nine.
Nick Pinchuk: Now let's move to RS&I. Sales in the first quarter, $475.9 million, with an organic gain of 3.7%. Advancements in our diagnostics and Mitchell-1 operations, and strong double-digit improvements in our OAM markets. Operating earnings for RS&I were $122.1 million, up $9.2 million, or 8.1% from last year. and the Operating Margin was 25.7%, representing an all-time high for the first quarter, and that was up 140 basis points, better than 2024, you know, reflecting continuing software expansion and the benefits of RCI.
Speaker Change: 2 million or eight 1% from last year.
Speaker Change: And the operating margin was 25, 7% representing an all time high for the first quarter and that was up 140 basis points better than 2024.
Speaker Change: Reflecting our continuing software expansion and the benefits of RCI RCI shine through the turbulence this quarter with a gang busters performance and it was enabled byproduct.
Nick Pinchuk: RCI shined through the turbulence this quarter with a gangbusters performance, and it was enabled by pride. So, let's talk about that product in a minute. We continue to enhance our software coverage, leveraging our proprietary databases with over 500 billion data points and 3 billion repair records. Numbers that are unrivaled in the industry and unrivaled in helping techs navigate and diagnose cars faster. You know, it's a lasting advantage.
Speaker Change: So let's talk about that product I mean are we continuing to enhance our software coverage leveraging our proprietary databases with over 500 billion data points and $3 billion repair records numbers that are unrivaled in the industry and unrivaled and help them navigate and diagnose cars faster.
Speaker Change: The last thing advantage cheap and keeping current with the tax prep keeping consistent are current with the with the text.
Nick Pinchuk: And keeping current with the tech preference, keeping consistent or current with the tech's now preferences, we celebrated the 20th anniversary of our SOLUS diagnostic unit. This version, the latest version, called a SOLUS Plus. Built in our San Jose, California Production and Development Center. It's aimed at simplifying the complex and making techs faster at diagnosing the true failures of modern vehicles. It's our fastest handheld with a two-second boot-up, and it's our fastest payback way to powerful vehicle diagnostics. And the techs responded to the campaign, recognizing the power and the speed of the handheld, all at a quick payback.
Speaker Change: Now preferences, we celebrated the 20th anniversary are sold of our Solus diagnostic unit. This version in the latest version call a soulless plus built in or it's built in our San Jose, California production and development Center, it's aimed at simplifying the complex and making tax faster at diagnosing with true failures of <unk>.
Speaker Change: Modern vehicles, it's our fastest pan handheld with a two second move up and as our fastest payback way the powerful vehicle diagnostics and the tax responded to the campaign recognizing the power and the speed of the handheld all at a quick payback. The program was actually one of the highlights of the quarter.
Nick Pinchuk: The program was actually one of the highlights of the quarter.
Nick Pinchuk: Later in the quarter, our Rochester Hills, Michigan facility released our all-new ProLink PLOS platform, the hand-held diagnostic platform focused on heavy-duty commercial trucks, new hardware, a faster processor, and an improved touchscreen. But the major advancement is integration with our repair database, with the repair databases of Mitchell One, putting repair procedures, vehicle specifications, and step-by-step routines for fixing the trucks directly into the tech's hands. The New Michigan-based pro-link put Snap-On in the clear lead for multi-model heavy-duty diagnostics.
Speaker Change: Later in the quarter, our Rochester Hills, Michigan facility released our all new.
Speaker Change: Crawling cost platform the diagnostic panel handheld diagnostic platform focused on heavy duty commercial trucks.
Speaker Change: Trucks, new hardware, a faster processor and unimproved touch screen, but the major advancement is the integration with our repair database with repair databases of Mitchell, one putting repair procedures vehicle specifications and step by separate teams for fixing the truck directly into the text hand.
Speaker Change: The new Michigan based polling put snap on.
Speaker Change: In the clear leader for multi model heavy duty diagnostics.
Nick Pinchuk: and Louisville, Louisville, Kentucky is home to our vehicle lift plant, all types and sizes of And among the biggest hits is our Challenger CB-10AV3, the two-post lift, with the unique ability to adjust in width on the fly. It's flexible enough to be installed in any facility, in any bay, and powerful enough to handle a wide range of vehicles. You know, lifting vehicles is essential for assessing suspension system and for making transmission setups and for EV repairs. And for a range of shop tasks, with this lift, the techs can adjust the suspended height, allowing for the best ergonomic approach to the work and bringing them closer to the work piece to execute the repair.
Speaker Change: And Louisville, Kentucky is home to our vehicle lift plant all types and sizes of lives.
Speaker Change: And among the biggest hit is our challenge our CV 10, 83, the two posts with with a unique ability to adjust and with on the fly.
Speaker Change: It's flexible enough to be installed in any facility in anyway, and powerful enough to handle a wide range of vehicles lifting vehicles as a central for accessing.
Speaker Change: The suspension system and for making trends for making transmission setups and for EV repairs and for a range of Ann and for a rare disorder shop that.
Speaker Change: With this lifts the tax kind of adjust the suspended height.
Speaker Change: Allowing for the best ergonomic approach to the work and bringing them closer to the workpiece to execute the repair the challenge. The challenge was $3 34, B, it's a great product and everybody knows that events from Louisville, Kentucky.
Nick Pinchuk: The Challenger 334B is a great product, and everybody knows it, and it's from louisville.com.
Nick Pinchuk: We know this is, you know, we know this is a turbulent But Ars and I had a strong quarter, and we believe it's poised for more, and we keep driving to expand that group's position with repair shop owners and managers, offering more new products developed by our value creation process, and we believe it is a winning formula.
Speaker Change: We know this as you know we know this is a turbulent time.
Speaker Change: But RF and I had a strong quarter and we believe it's poised for more and we keep driving to expand that group's position with repair shop owners and managers offer more new product developed by our value creation process and we believe is a winning formula.
Nick Pinchuk: Well, that's our first quarter. Quarters of both.
Speaker Change: Well that is our first quarter quarters of both challenge and advancement.
Nick Pinchuk: Challenge in advance. Grow smart. 50.7% up 20 basis points. Despite the volume low, the lower volumes, the tools group continues to pivot toward shorter payback items, matching text preferences, CNI penetrating critical industries, recording Q1 operating margin of 15.5% driven by precision, torque and custom solutions. RSNI also recorded an operating margin record in the first quarter, 25.7% driven by software and unmatched database.
Speaker Change: Gross margin.
Speaker Change: 57% up 20 basis points.
Speaker Change: Despite the volume below the lower volumes the tools group continues to pivot towards shorter payback items matching text preferences C&I penetrating critical industries recording Q1 operating margin of 15, 5% driven by precision torturing custom solution. Our C&I also recorded an operating margin record in the <unk>.
Speaker Change: Quarter, 25, 7% driven by software and unmatched database.
Nick Pinchuk: The environment is interesting. We are on alert. But we aren't cops. Competent in our product. in our brand and in our people. and confident in our ability to confront the fog.
Speaker Change: Environment.
Speaker Change: It is interesting we.
Speaker Change: We are on alert.
Speaker Change: But we are confident.
Speaker Change: Put it in our product.
Speaker Change: And our brand and in our people and.
Speaker Change: And confident in our ability to confront the FRA the fog.
Aldo Pagliari: with clear advan- Now I'll turn the call over to Aldo.
Speaker Change: With clear advantage.
Speaker Change: Now I'll turn the call over to Aldo Aldo Thanks, Nick our consolidated operating results for the first quarter are summarized on slide six.
Aldo Pagliari: Aldo?
Aldo Pagliari: Thanks, Nick.
Aldo Pagliari: Our consolidated operating results for the first quarter are summarized on slide six. Net sales of $1,141,100,000 in the quarter compared to $1,182,300,000 last year reflecting a 2.3% organic sales decline and $13,900,000 of unfavorable foreign currency translation. Activity in our automotive repair markets was mixed. Gains in sales to OEM and independent shop owners and managers were more than offset by lower sales to technicians through our franchise van channel. Within the industrial sector, or our C&I group, as compared to last year, declines in sales to the military and in our European-based hand tools business more than offset increases with other critical industry customers.
Aldo Cagliari: Net sales of $1 billion $141 1 million in the quarter compared to $1 billion $182 $3 million last year, reflecting a two 3% organic sales decline and $13 9 million of unfavorable foreign currency translation activity in our automotive repair markets was mixed gains in sales to OEM and independent shop owners.
Aldo Cagliari: Managers were more than offset by lower sales to technicians through our franchise there in general.
Aldo Cagliari: Within the industrial sector, our C&I group as compared to last year declines in sales to the military and in our European based hand tools business more than offset increases with other critical industry customers.
Aldo Pagliari: Consolidated Gross Margin improved 20 basis points to 50.7% from 50.5% last year, primarily reflecting benefits from the company's RCI initiative. Operating expenses as a percentage of net sales rose 180 basis points to 29.4 percent from 27.6 percent in 2024, mostly due to a non-recurring benefit of 11.3 million dollars from legal payments received last year, and the effects of lower sales volumes partially offset by savings from RCI and NBI. Operating earnings before financial services of $243.1 million in the quarter compared to $270.9 million in 2024 as a percentage of net sales operating margin before financial services of 21.3% compared to 22.9% reported last year, which included a benefit of 90 basis points from the legal payment.
Aldo Cagliari: It's all related gross margin improved 20 basis points to 57% from 55% last year, primarily reflecting benefits from the company's RCI initiatives.
Aldo Cagliari: Operating expenses as a percentage of net sales rose 180 basis points to 29, 4% from 47, 6% in 2024, mostly due to a nonrecurring benefit of $11 $3 million from legal payments received last year and the effects of lower sales volumes, partially offset by savings from RCI.
Aldo Cagliari: Operating earnings before financial services of $243 1 million in the quarter compared to $270 9 million in 2024 as a percentage of net sales operating margin before financial services of 21, 3% compared to 22, 9% reported last year, which included a benefit of 90 basis points from the legal payments.
Aldo Pagliari: Financial Services revenue of $102.1 million in the first quarter compared to $99.6 million last year, while operating earnings of $70.3 million compared to $68.3 million in 2024. Consolidated operating earnings of $313.4 million compared to $339.2 million last year. As a percentage of revenues, the operating earnings margin of 25.2% compared to 26.5% in 2024, again, including the benefit from the legal payment. Our first quarter effective income tax rate was 22.2% in both years. Net earnings of $240.5 million compared to $263.5 million in 2024 and net earnings per diluted share of $4.51 in the quarter compared to $4.91 per diluted share last year.
Aldo Cagliari: Financial services revenue of $102 1 million in the first quarter compared to $99 6 million last year, while operating earnings of $73 million compared to $68 $3 million in 'twenty 'twenty four consolidated operating earnings of $313 4 million compared to $339 2 million last year as a percentage of revenues.
Aldo Cagliari: The operating earnings margin of 25, 2% compared to 26, 5% in 2024 again, including the benefit from the legal payments. Our first quarter effective income tax rate was 22, 2% in both years net earnings of $245 million compared to 206.
Aldo Cagliari: $3 5 million in 2024, and net earnings per diluted share of $4 51 in the quarter compared to $4 91 per diluted share last year, when comparing the quarter's EPS with the first quarter of the prior year. There is a 25 of headwinds on a year over year basis in the first quarter of 2012.
Aldo Pagliari: When comparing the quarter's EPS with the first quarter of the prior year, there is a $0.25 of headwinds on a year-over-year basis. In the first quarter of 2025, diluted earnings per share included approximately $0.09 per share of increased year-over-year non-service net periodic pension expenses. primarily from higher amortization of actuarial losses, while the first quarter of 2024 included a $0.16 per share benefit from the legal payments.
Aldo Cagliari: <unk> five diluted earnings per share included approximately <unk> <unk> per share of increased year over year non service net periodic pension expenses.
Aldo Cagliari: Primarily from higher amortization of actuarial losses, while the first quarter of 2024 included a <unk> 16 per share benefit from the legal payments.
Aldo Pagliari: Now let's turn to our segment results for the quarter. Starting with the C&I group on slide 7, sales of $343.9 million compared to $359.9 million last year, reflecting a 2.9% organic sales decline and $5.6 million of unfavorable foreign currency translation. The organic reduction includes low single-digit decreases in activity with customers in critical industries and in the European-based hand tools business. With respect to critical industries, a double-digit reduction in sales to the military, mostly as a result of contract delays, more than offset higher sales of our specialty torque products and in other critical industry sectors. Gross margin improved 180 basis points to 42.6% in the first quarter, from 40.8% in 2024.
Aldo Cagliari: Now, let's turn to our segment results for the quarter.
Aldo Cagliari: Starting with the C&I group on slide seven sales of $343 9 million compared to $359 9 million last year, reflecting a two 9% organic sales decline and $5 6 million of unfavorable foreign currency translation.
Aldo Cagliari: The organic reduction includes low single digit decreases in activity with customers in critical industries and in the European based hand tools business with respect to critical industries, a double digit reduction in sales to the military mostly as a result of contract delays more than offset higher sales of our.
Aldo Cagliari: Specialty torque products and in other critical industry sectors gross margin improved 180 basis points to 42, 6% in the first quarter from 48% in 2012 before this was primarily due to lower material and other costs increased volumes and the higher gross margin sectors of critical industries and.
Aldo Pagliari: This is primarily due to lower material and other costs, increased volumes in the higher gross margin sectors of critical industries, and savings from RCI and Operating expenses as a percentage of sales 27.1% in the quarter compared to 25.4%, largely reflecting the impact of reduced sales volume. Operating earnings for the C&I segment of 53.2 million compared to 55.4 million last year, the operating margin improved 10 basis points to 15.5 percent from 15.4 percent in 2024.
Aldo Cagliari: Savings from RCI initiatives.
Aldo Cagliari: Operating expenses as a percentage of sales 27, 1% in the quarter compared to 25, 4% largely reflecting the impact of reduced sales volumes.
Aldo Cagliari: Operating earnings for the C&I segment of $53 2 million compared to $55 4 million last year. The operating margin improved 10 basis points to 15, 5% from 15, 4% in 2024, turning now to slide eight.
Aldo Pagliari: Turning now to slide 8. Sales in the Snap-On Tools group of $462.9 million compared to $500.1 million a year ago, reflecting a 6.8% organic sales decline and $3.6 million of unfavorable foreign currency translation. The organic decrease reflects a high single-digit decline in the U.S. business, partially offset by a low single-digit gain in our international operations. During the quarter, we believe the heightened economic uncertainty continued to weaken confidence and technician sentiment, which impacted their willingness to increase their purchases in the current environment. Gross margin declined 190 basis points to 46.3% in the quarter from 48.2% last year, mostly due to a year-over-year shift in product mix and from the decreased volume.
Aldo Cagliari: Sales in the snap on tools group of $462 9 million compared to $500 1 million a year ago, reflecting a six 8% organic sales decline at $3 6 million of unfavorable foreign currency translation. The organic decrease reflects a high single digit decline in the U S business Park.
Aldo Cagliari: We offset by a low single digit gain in our international operations during the quarter. We believe the heightened economic uncertainty continue to weaken confidence and technicians sentiment, which impacted their willingness to increase their purchases in the current environment.
Aldo Cagliari: Margin declined 190 basis points to 46, 3% in the quarter from 48, 2% last year, mostly due to a year over year shift in product mix and from the decreased volumes.
Aldo Pagliari: operating expenses as a percentage of sales of 26.3% in the quarter compared to 24.7% in 2024, largely reflecting the lower sales volume. Operating earnings for the Snap-On Tools group of $92.4 million compared to $117.3 million last year, the operating margin of 20% compared to 23.5% in 2024.
Aldo Cagliari: Operating expenses as a percentage of sales of 26, 3% in the quarter compared to 24, 7% in 2024, largely reflecting the lower sales volumes.
Aldo Cagliari: Operating earnings for the snap on tools group of $92 4 million compared to $117 3 million last year, the operating margin of 20% compared to 23, 5% in 2024.
Aldo Pagliari: Turning to the RS&I group, shown on slide 9. Sales of $475.9 million compared to $463.8 million in 2024, reflecting a 3.7% organic sales increase, partially offset by $4.9 million of unfavorable foreign currency translation. The organic gain includes a double-digit increase in activity with OEM dealerships and a low single-digit gain in sales of diagnostic and repair information products to independent repair shop owners and managers. These gains more than offset a mid-single-digit decline in sales of undercar equipment. Gross margin improved 70 basis points to 45.7% from 45% last year, primarily reflecting increased sales of higher gross margin products and benefits from RCI initiatives harshly offset by higher material and other costs.
Aldo Cagliari: Turning to the <unk> group shown on slide nine.
Aldo Cagliari: Sales of $475 9 million compared to $463 $8 million in 2024, reflecting a three 7% organic sales increase partially offset by $4 9 million of unfavorable foreign currency translation.
Aldo Cagliari: The organic gain includes a double digit increase in activity with OEM dealerships and a low single digit gain in sales of diagnostic and repair information products to independent repair shop owners and managers.
Aldo Cagliari: These gains more than offset a mid single digit decline in sales of under car equipment grew.
Aldo Cagliari: Gross margin improved 70 basis points to 45, 7% from 45% last year, primarily reflecting increased sales of higher gross margin products and benefits from RCI initiatives, partially offset by higher material and other costs.
Aldo Pagliari: Operating expenses as a percentage of sales improved 70 basis points to 20% from 20.7% in 2024, largely due to the higher sales volumes and savings from RCI initials. Operating earnings for the RS&I Group of $122.1 million compared to $112.9 million last year. The operating margin improved 140 basis points to 25.7% from the 24.3% reported last year.
Aldo Cagliari: Operating expenses as a percentage of sales improved 70 basis points to 20% from 27% in 2024, largely due to the higher sales volumes and savings from RCI initiatives operating.
Aldo Cagliari: Operating earnings for the <unk> group of $122 1 million compared to $112 $9 million last year. The operating margin improved 140 basis points to 25, 7% from the 24, 3% reported last year.
Aldo Pagliari: Now, turning to slide 10. Revenue from financial services of $102.1 million reflected an increase of $2.5 million or 2.5% from $99.6 million last year. Financial Services operating earnings of $70.3 million compared to $68.3 million in 2024. Financial Services expenses of $31.8 million compared to $31.3 million last year. Provisions for credit losses of $19.1 million compared to $18.8 million in 2024. As a percentage of the average financial services portfolio, expenses were 1.3% in the first quarters of both years. In the first quarters of 2025 and 2024, the respective average yields on finance receivables were 17.6% and 17.7%.
Aldo Cagliari: Now turning to slide 10.
Aldo Cagliari: Revenue from financial services of $102 1 million reflected an increase of $2 5 million or two 5% from $99 $6 million last year financial services operating earnings of $70 3 million compared to $68 $3 million in 'twenty towards before.
Aldo Cagliari: <unk> services expenses of $31 8 million compared to $31 $3 million last year provisions for credit losses of $19 1 million compared to $18 $8 million in 2024.
Aldo Cagliari: As a percentage of the average financial services portfolio expenses were one 3% in the first quarters of both years and.
Aldo Cagliari: In the first quarters of 2025 and 2020 for the respective average yield on finance receivables were 17, 6% and 17, 7%, while the average yield on contract receivables were nine 1% and 9% respectively.
Aldo Pagliari: While the average yields on contract receivables were 9.1% and 9% respectively. Total loan originations of $268.7 million in the first quarter represented a decrease of $33 million or 10.9% from 2024 levels, including an 11.7% decline in extended credit origination. The decrease in extended credit origination mostly reflects lower sales of big-ticket, longer payback items such as tool storage units.
Aldo Cagliari: Total loan originations of $268 $7 million in the first quarter represented a decrease of 33 million or 10, 9% from 2024 levels, including an 11, 7% decline in extended credit originations.
Aldo Cagliari: The decrease in extended credit origination, mostly reflects lower sales of big ticket longer payback items, such as tool storage units.
Aldo Pagliari: Moving 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. operations. For extended credit or finance receivables, the US 60 day plus delinquency rate of 2% is up 20 basis points for the first quarter of 2024, but unchanged from the last reported the number reported last Trailing 12-month net losses for the overall extended credit portfolio of $67.8 million represented 3.41% of outstandings at quarter end. While delinquencies and net losses have been trending upward, we believe that these portfolio performance metrics remain relatively balanced considering the current environment.
Aldo Cagliari: Moving 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 for.
Aldo Cagliari: For extended credit or finance receivables. The U S 60 day, plus delinquency rate of 2% is up 20 basis points from the first quarter of 2024, but unchanged from the last reported number reported last quarter.
Aldo Cagliari: Rolling 12 month net losses for the overall extended credit portfolio of $57 8 million represented 341% of Outstandings at quarter end, while at the liquid season net losses have been trending upward. We believe that these portfolio performance metrics remain relatively balanced considering the current environment.
Aldo Pagliari: Now, turning to slide 12. Cash provided by operating activities of $298.5 million in the quarter represent 121% of net earnings and compared to $348.7 million last year. The decline as compared to the first quarter of 2024 largely reflects the lower net earnings and higher year over year increases in working investment. Net cash used by investing activities of $32 million mostly reflected capital expenditures of $22.9 million and net additions to finance receivables of $8.2 million. Net cash used by financing activities of $193.6 million included cash dividends of $112.2 million and the repurchase of 260,000 shares of common stock for $87.2 million under our existing share repurchase program.
Aldo Cagliari: Now turning to slide 12.
Aldo Cagliari: Cash provided by operating activities of $298 5 million in the quarter represent a 121% of net earnings and compared to $348 $7 million last year.
Klein as compared to the first quarter of 2024, largely reflects the lower net earnings and higher year over year increases in working investment.
Aldo Cagliari: Net cash used by investing activities of $32 million, mostly reflecting capital expenditures of $22 9 million and net.
Aldo Cagliari: Additions to finance receivables of $8 2 million.
Aldo Cagliari: Net cash used by financing activities of $193 6 million included cash dividends of $112 2 million and the repurchase of 260000 shares of common stock for $87 $2 million under our existing share repurchase program.
Aldo Pagliari: As of quarter end, we had remaining availability to repurchase up to an additional $398.4 million of common stock under our existing authorization.
Aldo Cagliari: As of quarter end, we had remaining availability to repurchase up to an additional $398 $4 million of common stock under our existing authorizations.
Aldo Pagliari: Turning to slide 13. Trade and other accounts receivable increased $37.1 million from 2024 year-end, day sales outstanding of 66 days compared to 62 days at year-end 2024. Inventories increased $17.8 million from 2024 year-end, including some investment to mitigate supply chain uncertainty. On a trailing 12-month basis, inventory turns of 2.4 were the same as year-end 2024. Our quarter-end cash position of $1,434.9 million compared to $1,360.5 million at the end of 2024. In addition to our existing cash and expected cash flows from operations, we have more than $900 million available under our credit facilities. There were no amounts borrowed or outstanding under the credit facility during the year, nor was any commercial paper issued or outstanding in the year.
Aldo Cagliari: Turning to slide 13 trade.
Aldo Cagliari: Trade and other accounts receivable increased $37 1 million from 2024 year end days sales outstanding of 66 days compared to 62 days at year end 2020 for inventories increased $17 $8 million from 2020 for yearend, including some investment to mitigate supply chain uncertainties.
Aldo Cagliari: On a trailing 12 month basis inventory turns of two four were the same as year end 2024.
Aldo Cagliari: Our quarter end cash position of 1 billion $434 $9 million compared to $1 $365 million at the end of 2024. In addition to our existing cash and expected cash flows from operations, we have more than $900 million available under our credit facilities, there were no amounts borrowed or outstanding.
Aldo Cagliari: Under the credit facility during the year, nor was any commercial paper issued or outstanding in the year.
Aldo Pagliari: That concludes my remarks on our first quarter performance.
Aldo Cagliari: That concludes my remarks on our first quarter performance I will now review a few outlook items for the balance of the year with.
Aldo Pagliari: I'll now review a few outlook items for the balance of the year. With respect to corporate costs, we currently believe that expenses for the remainder of 2025 will approximate $27 million per quarter. Additionally, during 2025, as previously shared, we have and expect to incur approximately $6 million pre-tax per quarter of increased non-service pension costs, largely due to higher amortization of actuarial losses. These non-cash costs are recorded below operating earnings as part of other income and expense net on our Statement of Earnings, and we'll have about a $0.09 per diluted share quarterly negative effect on EPS for the balance of 2025.
Aldo Cagliari: With respect to corporate costs. We currently believe that expenses for the remainder of 2025 will approximate $27 million per quarter.
Aldo Cagliari: Additionally, during 2025 as previously shared we have and expect to incur approximately $6 million pre tax per quarter of increased non service pension costs largely due to higher amortization of actuarial losses. These noncash cost are recorded below operating earnings as part of other income and expense net.
Aldo Cagliari: On our statement of earnings and we will have about a nine cents per diluted share quarterly negative effect on EPS for the balance of 2025, we.
Aldo Pagliari: We expect that capital expenditures will approximate $100 million, and we currently anticipate that our full year 2025 effective income tax rate will be in a range of 22 to 23 percent. Finally, in 2025, our fiscal year will contain 53 weeks of operating results, with the additional week occurring in the end of the fourth quarter. This occurs every five or six years, and historically has not had a significant effect on our full year or fourth quarter total revenues or net earnings.
Aldo Cagliari: We expect that capital expenditures will approximate $100 million.
Aldo Cagliari: And we currently anticipate that our full year 2025 effective income tax rate will be in a range of 22% to 23%.
Aldo Cagliari: Finally.
Nick Pinchuk: And in 2025, our fiscal year will contain 53 weeks of operating results with the additional week occurring at the end of the fourth quarter. This occurs every five or six years and historically it has not had a significant effect on our full year or fourth quarter total revenues or net earnings I'll now turn the call back to Nick for his closing.
Nick Pinchuk: I'll now turn the call back to Nick for his closing thoughts. Nick? Okay, thanks, Aldo.
Nick Pinchuk: But Nick Thanks Aldo.
Nick Pinchuk: Well, that's our course. It's a period marked by particular and acute uncertainty, piling on our already competent poor technicians and abrupt development that set us back to the corner. Overall sales were down, low single digits, 2.4% organically. The OI margin was 21.3%, down but still relatively strong, authored by a gross margin of 50.7%, up 20 basis points despite the lower volume, again, you know, a gain attenuated by our considered decision to keep investing despite the lower volume. The tools group, impacted by the continuous airbursts of commercial change, sales and OI margin both afflicted, but C&I and RS&I had bulwark performances, pillars of, they were pillars of continuing strength supporting the enterprise.
Nick Pinchuk: Well, that's our quarter.
Speaker Change: It's a period marked by a particular and acute uncertainty piling on are already confidence poor technicians and abrupt development that set us back to the quarter overall sales were down low single digits to 4% organically Oi margin was 21, 3% down but still relatively strong authored by a gross margin.
Nick Pinchuk: 57% up 20 basis points, despite the lower volume.
Nick Pinchuk: Again again attenuated by are considered decision to keep investing despite the lower volume the tools group impacted by the continuous air burst of commercial chain sales and Oi margin, both afflicted, but C&I and ours and I had bulwark performance as pillars.
Nick Pinchuk: Our pillars of continuing strength supporting enterprise C&I successful in critical industries with torque and custom solution sales down but more than explained by the settling in of the new military leadership and overall registering an NOI margin of 15, 5% up 10 basis points of our first quarter record or deny another strong performance sales up three seven.
Nick Pinchuk: C&I, successful in critical industries with torque and custom solutions, sales down but more than explained by the settling in of the new military leadership and overall registering an OI margin of 15.5%, up 10 basis points for a first quarter record. RS&I, another strong performance, sales up 3.7% organically with OI margin of 25.7%, up 140 basis points for another first quarter record, driven by progress in software, the power of its databases and the benefits of RCI. Gains across that. And of course, the fog of terrorists, a challenge that dominates the commercial landscape, and Snap-On is not immune to the effects, but we believe we are at advantage.
Nick Pinchuk: Percent organically with Oi margin of 25, 7% up 140 basis point spread another first quarter record driven by progress in software the power of the day its databases and the benefits of RCI gains across that.
Nick Pinchuk: Of course, the fog of tariffs a challenge that dominates the commercial landscape and snap on is not immune to the effects, but we believe we are advantaged.
Nick Pinchuk: with newly expanded facilities, 15 factories all across America with deep know-how in America to make our major products, with a global sourcing network, 21 plants all across the globe to be agile and optimizing it against whatever tariff array emerges and with an ability to attract and hold manufacturing associates. So these are interesting. Action Pact with news every day. We are on alert. We, but we're also confident, confident in our ability to navigate through the turbulence, confident in the opportunities available in our central markets, and of our position in the fog of tariffs, not immune, but advantaged.
Nick Pinchuk: With newly expanded facilities 50 factories, all across America with deep Knowhow in America to make our major products with our global sourcing network 21 plants all across the goal is to be agile and optimizing it against whatever tariff array emerges and with an ability to attract and hold manufacturing associates. So these are.
Nick Pinchuk: Interesting times action packed with news every day, we are on alert.
Nick Pinchuk: But we're also confident.
Nick Pinchuk: Confident in our ability to navigate through the turbulence confident in the opportunities available in our central markets and of our position in the fog of tariffs not immune but advantaged and most of all.
Nick Pinchuk: And most of all, confident in our product that truly does make work. competent in our brand that really does mark the serious professionals and competent our people battle tested and committed that led us through that let's snap on through the great financial recession and and the pandemic and came out roaring. And we believe that powerful combination will overcome the turbulence and extend our long-term positive trajectory as it has done so many times in the past.
Nick Pinchuk: Confident in our product that truly does make work easier competent in our brand that really does mark the serious professionals and confident in our people battle tested and committed that led us through that led snap ons through the great financial recession in the in the pandemic and came out of Orange.
Nick Pinchuk: And we believe that powerful combination will overcome the turbulence and extend our long term positive trajectory as it has done so many times in the past.
Nick Pinchuk: Now before I turn the call over to the operator, I'll speak to our associates and franchisees in these turbulent days. I'll simply say, for your contributions made every day. for your deep dedication to our team and for your unshakable confidence in our future. Held fast, even in the turbulence. I thank you all.
Nick Pinchuk: Now before I turn the call over to the operator, I'll speak to our associates and franchisees in these turbulent days.
Nick Pinchuk: <unk> say for your contributions made every day.
Nick Pinchuk: For your deep dedication to our team and for your unshakable confidence in our future held fast even in the turbulence I. Thank you all.
Sara Verbsky: Now I'll turn the call over to the operator. Thank you.
Speaker Change: Now I'll turn the call over to the operator operator.
Speaker Change: Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Operator: We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then two.
Scott Stember: And your first question today will come from Scott Stember with Roth MKM. Please go ahead. Good morning and thanks for taking my questions. Nick, you were talking about, obviously, it sounds like the shops are still relatively strong, but the confidence for the technicians is falling even further than before. So, what's the game plan here? Do we see opportunities to further pivot to lower-priced items, or is there something else that needs to be done? Look, I think there's a couple of factors there. One is, the pivot worked in the first quarter. It's just, I don't think we've seen a place where the hits just kept coming so much.
Speaker Change: And your first question today will come from Scott <unk> with Roth.
Speaker Change: Please go ahead.
Scott: Good morning, and thanks for taking my questions.
Speaker Change: Scott.
Speaker Change: Nick you were talking about obviously it sounds like the shops are still relatively strong but the confidence for.
Speaker Change: The technician just falling even further than before so what's the game plan here do we see opportunities to further pivot to lower price.
Speaker Change: Items or is there something else that needs to be done. So look I think there's a couple of factors. There. One is the pivot worked in our first quarter. It's just I don't think we've seen a place where the hits just kept comments so much I mean, when the administration itself says there will be pain.
Nick Pinchuk: I mean, when the administration itself says, there will be pain, This is kind of unprecedented. And you can see it in the customer and the consumer sentiment. If you look at those numbers, you see the drop from December is precipitous. And so we didn't know about that when we were talking to people. You know, we talked to franchisees all over the country and we heard that in the shops. And really what it is, is our pivots worked. I talked to some of them that did pretty well. Some of those sets I talked about sold well.
Speaker Change: This is kind of unprecedented and you can see it in the customer and the consumer sentiment.
Speaker Change: If you look at those numbers you see the drop from December as precipitous and so we didn't know about that when we were talking to people, we talk to franchisees all over the country and command we heard that in a shaft and really what it is is our pivots work I've talked to some of them that did pretty well some of those sets I talked about sold well some of the.
Nick Pinchuk: Some of the products in, you know, like the cart sold well. What we learned in the period, I think, that's a little bit different, is we were pivoting to what you would call standard, short, quicker payback items. But what we found, if we tailored things at the bottom end of the bigger ticket items, like carts that simulated a box. like the SOLUS, which is at the bottom of the diagnosis. We could make hay with those as well. Now, you can't say you made great hay when you're down 6.8% organically, you know, but that's really what we saw in that situation.
Speaker Change: <unk> in like the cards sold well what we learned in the period I think that's a little bit different is we were pivoting to what you would call standard short quicker payback items, but what we found if we tailored things at the bottom end of the bigger ticket items like carts that stimulated a box.
Speaker Change: Like the Solas, which is at the bottom of the diagnostics, we could make hay with those as well now you can't say it made great Hey, when youre down six 8% organically.
Speaker Change: But that's really what we saw in that situation. So we're going to keep pivoting because we saw continued traction you've just got over one.
Nick Pinchuk: So, we're going to keep pivoting because we saw it continue traction. It just got overrun. This was an unusual period. I think anybody who says this is an unusual period isn't reading the Wall Street Journal and seeing tariffs in 254 times. And so, the thing is, that's what we saw. So, we think the pivot, we learned some things on how to make the pivot better. So, we're going to continue to do that and we'll learn from those things as we adjust. We're pretty confident that this works. You know, and if you don't believe it's America, look at the outside the United States outside the United States, less effect affected by all this turbulence in recent days, all that stuff, all those businesses went okay.
Speaker Change: This was an unusual period I think anybody who says this is an unusual period isn't reading in the Wall Street Journal and seeing tariffs and 254 times and so so the thing is that's what we saw so we think the pivot we learned some things on how to make the pivot better. So we're going to continue to do that and we'll learn from those things as we adjust we're pretty confident that this work.
Speaker Change: <unk>.
Speaker Change: And if you don't believe it's Americas look at the outside the United States outside the United States less effect affected by all this turbulence in recent days all that all those businesses went okay.
Nick Pinchuk: Got it. And then if you're looking at RS&I and CNI, RS&I in particular, if you were to back out the intercompany declines, which I assume had a pretty big impact there, what would the organic rates, sales rates in RS&I have been? It's about a little bit better. I think it's, you know, the organic rate was about 3.7%. And if you backed out the, or, you know, the inner companies, you're probably in the four range, something like that, maybe a little bit better in that situation. RS&I, the big, the big, the big thing about RS&I is, it's software packed.
Speaker Change: Got it and then if you're looking at <unk> in C&I artist and I in particular, if you were to back out the intercompany declines, which I assume.
Speaker Change: Had a pretty big impact there what would the organic rates sales rates in Arizona had been.
It's about.
Speaker Change: It's a little bit better I think it's.
Speaker Change: The organic rate was about three 7% if you backed out the.
Speaker Change: The intercompany as Youre, probably in the four range something like that maybe a little bit better in that situation. Our F&I the big the big the big thing about RSA and ideas.
Speaker Change: Software pack. These days software was up more than that.
Nick Pinchuk: Software is up more than the increase in that. And the cool thing about it, Scott, is if you look at the RS&I divisions, almost all of them are up nicely profitability. So they're hitting on all cylinders. They really did have a strong quarter. And if you look back, it's been. Strong Quarter after Strong Quarter after Strong Quarter. Now, I realize some people may have thought it would have been done better. They might have sold more, you could have argued that, maybe a percentage point more, you could have thought that, but 25.7%, up 140 basis points.
Speaker Change: Increase in that and the clothing about it Scott is if you look at the <unk> division almost all of them are up nicely profitability. So they are hitting on all cylinders. They really did have a strong quarter and if you look back it's been.
Speaker Change: Strong quarter at a strong quarter with a strong quarter now I realize some people may have thought have been done better. They might have sold more you could have argued that maybe a percentage point more you could absorb that but but 25, 7% up 140 basis points.
Nick Pinchuk: This is a pretty good quarter. And it's driven on the strength of their product and the increasing ability to affect the database. AI is part of that. You know, part of the reason why the databases are getting better and more effective is we can now translate what the, when you use natural language processing, that'll translate what the technicians say about the repairs much more efficaciously into a database without as much time. So we're able to move forward in building that database much more effectively. And that's helped us in this situation. But you can see, you can see there that even in diagnostics, we're making them, we're pretty well positioned against the terrorists.
Speaker Change: It was a pretty good quarter, and it's driven on the strength of their product and the increasing ability to affect the database AI as part of that part of the reason why the databases are getting better and more effective as we can now translate what the what the week when use natural language processing that'll translate what the technician say about the repairs.
Speaker Change: It's much more efficacious Lee in.
Speaker Change: Into a database without without as much time, so we're able to move forward in building that database much more effectively and that's helped us in this situation, but you can see you can see there that even in even in diagnostics, we're making them, we're pretty well positioned against the tariffs.
Nick Pinchuk: You know, I'm not saying we're immune. I've said this many times. We're not immune. But we like where we are. Got it. And then last question, before I go back in the queue, sounds like the military had a pretty profound impact on critical industries. Was that having anything to do with these DOJ movements? Or is there something that we should expect to see in the quarters ahead? I don't know. You know, I don't know if it had anything to do with the DOJ. I think it more had to do with people trying to, you know, you got budget cycles in there.
Speaker Change: No I'm not saying, we're immune I've said this many times were not but we like where we are.
Speaker Change: Sure.
Speaker Change: Got it and then last question before I go back in the queue.
Speaker Change: It sounds like the military you had a pretty profound impact on the <unk>.
Speaker Change: Critical industries was that having.
Speaker Change: Having anything to do with these <unk> movements or is there something.
Speaker Change: That we should expect to see in the quarters ahead.
Speaker Change: I don't know if that had anything to do with indulge I think it more has to do with people China, you've got budget cycles in there, but I will tell you Scott we saw at an implied administration.
Nick Pinchuk: But I will tell you, Scott, we saw it in a Biden Anytime the administration changes, there's a new sheriff in town, and he won't be pushed around, you know, and so the thing is, they change the, you know, they start talking about the procurement processes and so on, slows everything down, and then after a while, the war fighters kind of say, you know, the .50 caliber bullets, when they go overhead, I'd like to have better tools, you know, I don't want to have, I don't want to have somebody else's tools or some tools that are missing, and everybody caves, you know, and it goes back to normal.
Speaker Change: Anytime the administration change, there's a new sheriff in town and he won't be pushed around you know and so the thing is.
Speaker Change: They changed the <unk>.
Speaker Change: I start talking about the procurement processes and so on slows everything down and then after a while the war fighters kind of say the 50 caliber bullets. When they go over ahead I'd like to have better tools, you know I don't want I Havent I don't want to have somebody else's tool there are some some tool.
Speaker Change: Tools that are missing and everybody case and it goes back to normal so I think thats really what youre seeing mostly in the situation.
Nick Pinchuk: So I think that's really what you're seeing, mostly in a situation. I don't think it was associated with DOJ, except for maybe, Scott, the psychology of the DOJ sword waving overhead of all government employees. But I, I don't know how to evaluate that. It was, it was significant, you know, without, let's put it this way.
Speaker Change: I think it was associated with dose except for maybe Scott the psychology of the Doge sort waving over ahead of all government employees, but I I don't know how to evaluate that it was it was significant without let's put it this way.
Nick Pinchuk: Without the military downturn, C&I would have been up, gotcha. All right, that's all I have. One sector was enough. Everything else was good.
Speaker Change: Without the military downturn C&I would've been up.
Speaker Change: Got you all right.
Hector was enough everything else it was good.
Scott Stember: Awesome, thank you so much.
Speaker Change: Awesome. Thank you so much.
David Macgregor: And your next question today will come from David MacGregor with Longbow Research. Please go ahead. Good morning, everybody. Good morning, Nick. I want to start off by just asking you about truck level sales comps. What do you think those look like this quarter in the US?
David Macgregor: And your next question today will come from David Macgregor with Longbow Research. Please go ahead.
Speaker Change: Thanks, Good morning, everybody.
Morning, David.
David Macgregor: Good morning, Nick.
Speaker Change: I wanted to start off with just asking you about truck level sales comps what do you think those looked like this quarter in the U S. Let's say that you said you mean the vans.
Nick Pinchuk: Say that again, you said truck, you mean the van? Sales Cops. Yeah, Sales Cops off the van. They're about the same as, you know, we saw to the band, you know, about that same level. It was pretty much matched up, you know, in this quarter. It isn't always matched up in a quarter, but this particular quarter was kind of Dead on, you know, pretty much the same. So we sold to them about what they sold off the vans. And I don't know what you make of that, because it always, you know, it always rolls up and down.
David Macgregor: And the sales comps sales comps off to Dan.
David Macgregor: They are about the same as we saw in the band you know about that same level. It was pretty much matched up you know in.
David Macgregor: And this quarter it isn't always matched up in a quarter, but this particular quarter.
David Macgregor: Data on you know.
David Macgregor: Pretty much the same so.
David Macgregor: We sold to them about what they sold off the vans and I don't know what you make of that because it always it always rolls up and down as you know because you've followed us for years and what kind of man. It usually varies from period to period, but this was one of those that matched up.
Nick Pinchuk: As you know, because you've followed us for years, you know, it kind of, it usually varies from period to period. But this was one of those that matched up.
Nick Pinchuk: Luke, you didn't see any de-stocking at the truck level? No, we didn't. We didn't see that. Now, there could have been some, you know, but I don't I don't think so. Because because the numbers match. So of course, it's an imperfect. It's an imperfect situation.
David Macgregor: You didn't see any destocking at the truck level.
David Macgregor: No we didn't we didn't see that in either good or bad.
David Macgregor: But I don't I don't think so because I think it's a numbers match. So of course, it's an imperfect it's an imperfect situation and I will tell you that the franchisees start to get daunted when they hear the technician's talk about these things, but the franchisees have had a lot more I would say cushion to deal with what I said would be an often.
Nick Pinchuk: And I will tell you that the franchisees start to get daunted when they hear the technicians talk about these things. But the franchisees have have a lot more, I would say, cushion to deal with what I said would be an off-the-walls thing, off-the-rails thing. I think really what happened is reflected in a customer sentiment. And maybe some of the franchises got some of that thing. But there wasn't much de-stocking.
David Macgregor: Walls things off the rail really.
David Macgregor: Really what happened is reflected in our customer sentiment and maybe some of the franchisees get some of that thing, but there wasn't much destocking.
Nick Pinchuk: And then you talked about negative mix in the tool segment. I'm just trying to reconcile that with the narrative. Diagnostics, the low end diagnostics sold. Remember, I said, that's why I brought that's actually why I put the SOLUS thing in there. One, we learned something about it that we could we could chip away at the bottom end of the big ticket items and have success if we position them and program them correctly. And diagnostics driven by that low end, the SOLUS, you know, the speedy one and cheaper was up in the quarter. And any time diagnostics is up in a quarter, it's a it's a weight on tools, groups, margins, because, as you know, they share the margin with the RS&I.
Speaker Change: And then you talked about negative mix in the tools segment I'm, just trying to reconcile that with the narrative diagnostic maybe big ticket diagnostics. The low end diagnostics sold so remember I said, that's why I brought that's actually why I put the solas thing in there.
Speaker Change: One we learn something about it that we could we can chip away at the bottom end of the big ticket items that have success, if we position them and program them correctly and diagnostics driven by that low and the solus. The speedy one and cheaper was up in the quarter and anytime diagnostics is up in a quarter. It's a wait.
Speaker Change: On tools groups.
Speaker Change: Margins because as you know they share the margin with the <unk> group.
Nick Pinchuk: Right.
Nick Pinchuk: So what would hand tools have looked like, Nick, just to isolate that category? Hand tools were not up, but they were certainly not down the way tool storage was. Tool storage was a killer. And if you look at the origination, If you look at the originations in the quarter, you can see it, huh? You know, coming out of last year, the originations were up 5.8 percent, were down 5.8 percent. Well, they're down almost double. In this quarter, 11.7%. And I think that's right at all.
Speaker Change: Great. So what would a handful so it looked like Nick just to isolate that category and tools and tools.
Speaker Change: Not up but they were certainly not down the way tool storage was tool storage was a killer and and if you look at the originations.
Speaker Change: You look at the originations in the quarter you can see it huh.
Coming out of last year's originations were up five 8% were down five 8%, while they were down almost double.
Speaker Change: In this quarter 11, 7% and I think thats right at all.
Nick Pinchuk: Okay, how do you respond promotionally to the weaker demand? Well, you know, our margin Our gross margins in the tools group are down some, but some of that has to do with the mix I just talked to you about, you know, and we tend not to change prices that much. I mean, certainly across the corporation, I would say the 50.7% gross margin is ample evidence that, you know, up 20 basis points when your volume is down like this, is ample evidence that you aren't giving it away in pricing. So, while we do get more active in promotions and we try to make it more attractive to the customer, we're not out there begging for volume.
Speaker Change: Okay.
Speaker Change: Spot promotional due to the weaker demand.
Speaker Change: Well you know.
Our margins are.
Speaker Change: Our gross margins in the tools group was down some but some of that has to do with the with the mix I just talked to you about.
Speaker Change: We tend not to change prices that much I mean, certainly across the corporation.
Speaker Change: I'd say the 57% gross margin is ample evidence that up 20 basis points. When your volume is down like this is ample evidence that you arent, giving it away in pricing. So while we do get more active in promotions and we try to we try to make we try to make it more attractive to the customer.
Speaker Change: That out there Bagan for volume.
Nick Pinchuk: You know, I don't like that.
Speaker Change: I don't like that and so we don't we don't really do that.
Nick Pinchuk: And so we don't, we don't really And Nick, can you talk about the regional kickoff? Can you talk about the regional kickoffs and just were orders up or down this year and by how much? The regional kickoffs were down this year. And I'm not going to give you how much because it was it was distorted, David, it's hard for us to evaluate because You know, not so great is that several of them were affected by snow. And so what happened was, some of these regions, I was at one, you know, some of these regions are pretty big, you know, and so snowstorms were bearing down so people left early.
Speaker Change: And then can you talk about the regional Kickoffs can you talk about original kick offs, and just where orders up or down this year and by how much the regional Kickoffs were down this year and I'm not going to give you how much because it was it was distorted David it's hard for us to evaluate because.
Speaker Change: Not not so great is that several of them were affected by snow.
Speaker Change: And so what happened with some of these regions somebody's reads I was at one you know somebody's regions are seeing some of these regions are a pretty big you know and so snow storms were barren down so people left early.
Nick Pinchuk: And so we didn't quite have the full participation that we like to have in those situations. So it was hard for us to evaluate. It was one of the things that was difficult to evaluate what was happening in a quarter and a beginning because we looked at those, and a lot of them were subject to these kinds of one-off type weather situations. And so we weren't sure what to make of that, but, you know, when you talk to the techs themselves, you could hear that it was certainly starting to break through, especially as we started to get later in January when you started to hear, after the inauguration.
Speaker Change: And so we didn't quite have the specific the full participation that we like to have in those situations. So it was hard hard for us to evaluate it was one of the things that was difficult to evaluate what was happening in a quarter in the beginning because we looked at those and a lot of them were subject to these kinds of one off type weather situations and so we werent sure what the make of that but.
Speaker Change: You know when you talk to the tax themselves you can hear that it certainly is starting to break through especially as we started to get later in January when you started here after the after the inauguration everybody loves the archives loved the administration, but like I said I think I said last quarter. It feels like they're on space mountain, they're afraid they're going to go off the rail.
Nick Pinchuk: Everybody loves the, our guys love the administration, but like I said, I think I said last quarter, it feels like they're on Space Mountain. They're afraid they're going to go off the rails. Right.
Speaker Change: Yes.
Nick Pinchuk: Last question for me is just on manufacturing capacity. And, you know, you've obviously done a lot there recently. But I'm also guessing that backlogs are directionally lower now as a consequence of this demand situation. Can you say about how much your backlogs are down and in what product categories you may be seeing the greatest backlog depletion? Full storage. Remember we used to have, remember about a, what was it, a year, a year and a half ago, we were up to our eyeballs in full storage backlog. Well, it's kind of liquidated that. One, we expanded our Algona facility, and the demand has dropped off for the big ticket boxes.
Speaker Change: Great last question for me is just on manufacturing capacity and you've obviously done a lot there recently, but.
Speaker Change: I'm also guessing the backlogs are directionally lower now as a consequence.
Speaker Change: A situation can you say about how much your backlogs are down.
Speaker Change: What product categories, you may be seeing the greatest.
Speaker Change: Backlog depletion.
Speaker Change: Tool storage.
Speaker Change: Yeah.
Speaker Change: Remember, we used to have remember about or was it a year or year and a half ago, we were up to our eyeballs in tool storage backlog, while it's kind of liquidated that one we expanded our algoma facility and the demand has dropped off with the big ticket boxes now we shifted more capacity to lockers in cards and so on which is I think.
Nick Pinchuk: Now we shifted more capacity to lockers and carts and so on, which is I think one of the things we have confidence in going forward. So we think we're in good shape. I mean, we don't have a lot of backlog everywhere. Now certain products are backlogged. Swivel sockets, for example, have a little bit of backlog. You always have some kinds of things. But generally, the expanded capacity has put us in the right position. That's why we think we're, one of the reasons why we think we're advantaged for the tariff. You know, we are available for American production.
Speaker Change: One of the things we have confidence in going forward. So we think we're in good shape. I mean, we don't have a lot of backlog everywhere that certain products or backlog swivel sockets. For example have a little bit of back while you always have some kinds of things, but generally the expanded capacity has put us in the right position. That's why we think we are one of the reasons why we think we're advantaged with TACE.
Speaker Change: We are available for American production.
Nick Pinchuk: Got it. Thanks very much. Okay.
Speaker Change: Got it thanks very much.
Speaker Change: Hey.
Gary Prestopino: Your next question today will come from Gary Prestopino with Barrington Research. Please go ahead.
Speaker Change: Your next question today will come from Gary <unk> with Barrington Research. Please go ahead.
Unknown Speaker: Unknown Speaker Good morning, everyone. Nick, Nick, you mentioned in your your, your opening comments about the fact that hours worked were down Yeah, technicians as well in the quarter. I mean, you know, vehicle repair is generally kind of mission critical. So could we assume that that was Unknown Director, SNES Unknown Director, SNES Unknown Director, SNES Unknown Director, SNES You know, hours down, hours worked, and the rolling 12 was up. Low single digits, but it was up. In the last couple of months, it was down. you know, I want to say 3.3% or something like that.
Gary: Good morning, everyone. Good morning here.
Speaker Change: You mentioned in your.
Speaker Change: Your opening comments about the fact that man hours worked were down.
Speaker Change: Yeah take machines as well in the quarter.
Speaker Change: Diesel repair is generally kind of mission critical so could we assume that that was.
Speaker Change: Less elective maintenance kinds of services.
Gary: Gary I put that in because it is a fact.
Gary: Hours down our hours worked in the Rolling 12 was up.
Gary: Low single digits, but it was up in the last couple of months it was down.
Gary: I want to say three 3% or something like that.
Nick Pinchuk: I'm not sure what that means over a couple of months, you know, it does mean I suppose, that some of the garages aren't relatively white hot, you know, in the last couple of months, but in wintertime, that could mean a lot of So in normal times, you know, lately, those things, and lately, all the metrics in vehicle repair have been monotonically improving, improving, improving, improving, improving. And so I suppose in We're kind of sensitized to the idea for a couple of months, if there was a drop off, and it got my attention and some other people's attention.
Gary: I'm not sure what that means over a couple of months you know it does mean I suppose that some of the garages are relatively white hot.
Gary: And the last couple of months, but in wintertime that could mean a lot of things.
Gary: So in normal times lately, those things and lately, all the metrics and vehicle repair had been monotonically, improving improving improving improving improving.
Gary: And so I suppose in.
Gary: We're kind of sensitize to the idea for a couple of months. If there was a drop off and it got my attention and some other people's attention, but I'm not sure what to make of it. That's a long term trends you would believe of ours are down it probably has elected elective things because you got to have your car.
Nick Pinchuk: But I'm not sure what to make of it as a long term trend. You would believe if hours are down, it probably is elective, elective things because you got to have your car. You know, so you would think that would be the case, and maybe some people are worried about the off-the-rails scenario. I think one of the things you do see is you see consumer sentiment is down, you see our numbers down. But you see other people say, well, consumer activity is strong, but I think they're dealing with a different fight goal, zip goal. FICA, CIPCO, you know, better, better, better, you know, credit, the more the better healed people than maybe the mechanics in the garage, or the people of work.
Gary: So you would think that would be the case and maybe some people are worried about you off the rail scenario I think I think one of the things you do see is you see consumer sentiment is down you see our numbers down.
Speaker Change: But you see other people say welcome solar consumer activity is strong, but I think they are dealing with a different a different FICO zipcode.
Gary: <unk>.
Gary: Or better.
Gary: Better.
Gary: Credits.
Gary: The better heeled people than maybe the mechanics, and the garage or the people of work I think that's part of what we see are ourselves. Although I think said in his presentation that our own yield dropped from 17, 7%.
Nick Pinchuk: And I think that's part of what we see ourselves. Aldo, I think, said in his presentation that our own yield dropped from 17.7% to 17.6%. And that really is the people who are who are originating loans for us are better credit risk than they were before. And so it just means that the people at the bottom end are too reticent, they're too afflicted by the uncertainty. So maybe you see some of that in the garages too, I don't know. because I think people got to repair the cars, you know, sooner or later, you got to go in.
Gary: To 17, 6% and that really is the people who are core.
Originating loans for us.
Gary: Our better credit risk than they were before.
Gary: And so it just means that the people at the bottom end.
Gary: Our two reticent or too affected by the uncertainty. So maybe you see some of that in the garage as to I don't know.
Gary: Because I think people got to repair the cars you know sooner or later you got to go in.
Unknown Speaker: Right. All right. Thank you.
Gary: Right Alright, thank you.
Nick Pinchuk: Just lastly, could you maybe comment on, you made a lot of reference to the fact that, you know, this whole issue with tariffs coming up could have impacted technician competence. As you went through your quarter, did things really accelerate on the downside starting in March? You know, one could take away from what you were saying that. A lot of the impact in the tools group in particular was due to these The Uncertainty of Tariffs. It wasn't only terror. You know, you come out and you're saying, okay, we're gonna, we're gonna reduce the government. But then they start, you know, I have no political, there's no political commentary, but they are laying off people seems like willy nilly, you know, in other words, no one knows what and so I think the people at work, even though they truly believe in the in the trajectory and the and the goals of the current administration, they're saying, I don't know how the hell they can change all the government this much and not come out with some screw ups.
Speaker Change: And just lastly could you maybe comment on you made a lot of reference to the fact that.
Gary: This whole issue with tariffs coming up.
Speaker Change: Impacted technician competence.
Speaker Change: As you win as you went through your quarter did things really accelerated on the downside.
Speaker Change: Starting in March.
Speaker Change:
Speaker Change: One could take away from what you were saying that.
Speaker Change: A lot of the.
Speaker Change: The impact in the tools group in particular.
Speaker Change: <unk> was due to these young.
Speaker Change: The uncertainty regarding tariffs and that kind of cropped up in March so.
Speaker Change: Maybe give us a good I would say I would say Gary for for the guys I talk to it.
Speaker Change: It wasn't only terrorists.
Speaker Change: We'll come out and you're saying, Okay, we're going to we're going to reduce the government, but then they start.
Speaker Change: I have no political there's no political commentary, but they are laying off people seems like Willy Nilly you know in other words, no one knows what and so I think that people have or even though they truly believe in the trajectory and the goals of the current administration, they're saying I don't know how they can change all of government. This much.
And not come out with some screw ups and then you start hearing stuff like Greenland than Panama in Gaza.
Nick Pinchuk: And then you start hearing stuff like Greenland and Panama and Gaza. You hear that stuff. And so even before they started talking about the tariffs, people are saying, geez, I don't know. And what's really happening here. I'm worried that the world's going to come off the rails and the tariffs came over the top. So that's a long way of saying I don't think things changed so much. I wouldn't say it got worse. I think just in general, this was a continual statements that people said, I don't know, our people after all aren't really affected by the tariffs, but they're kind of saying the broad view, I don't know if some administration can do this many things, you know, coming up with new ideas every day, and not strike out a few times, that might screw us up bad.
Speaker Change: Here that stuff.
Speaker Change: So even before they started talking about the tariffs people, saying geez I don't know and what's really happening here I'm worried that the world is going to come off the rail and the tariffs came over the top so that's a long way of saying I don't think things changed so much I wouldn't say it got worse.
Speaker Change: I think it just in general this was a continual.
Speaker Change: Statements that people said I don't know our people after all aren't really affected by the tariffs, but they're kind of saying the broad view I don't know some administration can do this many things.
Speaker Change: Coming up with new ideas every day and not strike out a few times that might screw us up badly.
Unknown Speaker: That's the general Okay, thank you.
Speaker Change: That's the general view.
Speaker Change: Now tariffs.
Speaker Change: Tariffs is a different thing it's more effects the companies.
Speaker Change: When I say the fog of tariffs I'm talking about it but you know what.
Speaker Change: Snap on level or the company level.
Speaker Change: That's dominating everybody everybody wanted by the way everybody, who wants to talk about tariffs anybody who wants to talk about tariffs and and so it is a five that does affect technicians and it affects a lot of different things. We just say in that fog as we look forward, we think we're advantaged.
Speaker Change: Okay. Thank you.
Speaker Change: Yes.
Sherif El-Sabahi: And your next question today will come from Sherif El-Sabahi with Bank of America. Please go ahead. from Orange Street.
Speaker Change: And your next question today will come from Shneur <unk> with Bank of America. Please go ahead.
Speaker Change: Hi, good morning.
Speaker Change: Understood.
Nick Pinchuk: I think within the tools group, are you able to give us a sense of how the demand drop looks throughout the quarter, maybe a bit of cadence, if there's anything you'd like to note? There wasn't much cadence. You know, Sherif, it's hard to say. You know, usually... usually things are different from week to week. This quarter was more uniform. You know, it wasn't, it wasn't, just like I tried to explain to Gary a minute ago, you know, the, it started out, we thought, and there was really bad weather, so sometimes you can say, oh, okay, it's bad weather, and that happens often in the, in the beginning of the year, because volumes are always light, and so you're like that legend, the princess and the pea, any little change will affect you, and, but it kept...
Speaker Change: Just within the tools group are you able to give us a sense of how the demand dropped looked throughout the quarter and maybe a bit of cadence.
Speaker Change: And it wasn't.
Speaker Change: You know.
Speaker Change: It's hard to say.
Speaker Change: Usually.
Speaker Change: Usually things.
Speaker Change: Our different from from from week to week.
Speaker Change: This quarter was more uniform.
Speaker Change: No. It wasn't it wasn't just like I tried to explain to Gary a minute ago you know the.
Speaker Change: It started out we thought and there was really bad weather. So sometimes you can say, okay. It's bad weather and that happens often in the beginning of the year because volumes are always light and so you'll like that legend, the princess and the Pea any little change will affect you and what is kept.
Nick Pinchuk: kept being weak. And, you know, when you talk to people, once the administration got in place, they started listening. And they're saying, geez, our guys getting a little Overactive, let's say, and that's when they started to worry about the world. You know, it's interesting when you talk to the people at work, you know, the technicians and the guys in the factory, they're pretty savvy on this stuff. And I think it's because they don't have that much vision. And so they're very sensitive to this. We found this all through, you know, in a lot of different situations.
Speaker Change: Kept being weak.
Speaker Change: When you talk to people once the administration got in place. They started listing in there, saying he's our guys getting a little.
Speaker Change: Over overactive, let's say and then that's when they started to worry about the world.
Speaker Change: It's interesting when you talk to the people who are working on the technicians and the and the guys in effect. They are pretty savvy on this stuff and I think it's because they don't have that much version.
Speaker Change: And so they're very sensitive to this we found this all through you know a lot of different situations and in some ways. There was a canary in the coal mine because that's why I'm talking about uncertainty for some time.
Nick Pinchuk: And in some ways, through the canary in the coal mine, because that's what I've been talking about uncertainty for some time. Understood. And, you know, we've talked about this dynamic of a shift to quicker payback items for quite a while. Have you seen any shift in the quarter just with regards to the volume? Is that purely just a harder shift towards this trend? Or are you seeing lower demand for even some of the quicker payback items as well? Well, yeah, we did see some luck, but but we, you know, look, I'm just telling you what I think happened from a lot of interviews, you know, windshield surveys and fortified by the metrics of the customers consumer sentiment numbers.
Speaker Change: Understood.
Speaker Change: We've talked about this dynamic of a shift a quicker payback items for quite a while have you seen any shift in the quarter just with regards to the volume is that purely just a harder shift towards this trend or are you seeing lower demand for even some of the quicker payback items as well.
Speaker Change: Well, yeah, we did see some but we you know.
Speaker Change: Look I'm, just telling you what I think happened from a lot of interviews you know windshield surveys and fortified by the metrics of the customers just consumer sentiment numbers, but if you look at it.
Nick Pinchuk: But if you look at it, We had our, I, the things I put on the, on the, on the, in the event, like, you know, in the, in the, in the script, in the, in the discussions, you know, like Solus, big hit, Synergy paired with the flank drop rockets, low probability, big hit, you know, the idea, so those are low payback items that are big hit, the, the, the, the tool, the sturdy tool storage cart, unprecedentedly holding 240 foot pounds, big hit, so you had hits in the lower payback items. We had almost no hits in the big payback.
Speaker Change: We had our eye the things I've put up on the.
Speaker Change: On the in the event like that.
Speaker Change: In the script and in the discussions like Solus Big hit synergy Pat paired with the flank drive pockets low probably a big hit.
Speaker Change: So those are low payback items that are bigger.
Speaker Change: The tools the sturdy tool storage car, our president only holding 240 foot pounds Big hit So you had hits in a lower payback items, we had almost no hits in the big payback items.
Nick Pinchuk: So you can see the progress. I just think, like I said, my assessment, and I think this is played out as some both quantitative and qualitative support from interviews and from the consumer sentiment numbers, is that the effects of the last quarter on the general populace with topped off by the tariffs were so pervasive that they outran our progress in those. So I think we've made progress in our performance, it's just everything else kind of, the level of everything else kind of dropped. But the stuff we focused on seemed to work. It's just the things, you can't focus on everything.
Speaker Change: So you could see the progress I just think like I said my assessment and I think this is played out as some some both quantitative and qualitative infrared support from from interviews and from the consumer sentiment numbers is that the the effects of the last quarter on the general populace.
Speaker Change: With topped off by the tariffs was so pervasive that they outran, our progress and those things.
Speaker Change: So I think we've made progress in our performance. So just everything else kind of at a level of everything else kind of dropped but the stuff. We focused on seems to work. It's just the things you can't focus on everything.
Speaker Change: Understood. Thank you for the color.
Unknown Speaker: Thank you for calling. Transcription by CastingWords And your next question today will come from Luke Junk with Barrett.
Luke Young: And your next question today will come from Luke Young with Baird. Please go ahead.
Luke Junk: Please go ahead.
Nick Pinchuk: Good morning. Thanks for taking questions. Nick wanted to start in terms of how you can play offense in this environment. And maybe just a finer point, thinking mostly about the tools group in terms of marketing, kind of the balance of engaging franchisees versus engaging with technicians directly. And in terms of investments, the steady pace of investment, just where we might see you look incrementally in terms of allocating dollars. Well, I think I said it, I think we're kind of encouraged by the idea that we can chip away at the lower end of what you might call our traditional big ticket item.
Hi, good morning, Thanks for taking my questions.
Speaker Change: Nick I wanted to start in terms of how you can play offense in this environment, maybe just a finer point.
Speaker Change: Mostly about the tools group in terms of marketing kind of the balance of engaging franchisees versus engaging with technicians directly and in terms of investments the steady pace of investment just where we might see you look incrementally in terms of allocating dollars this year.
Speaker Change: Well I think I said it I think we're kind of encouraged by the idea that we can chip away at the lower end of what you might call our traditional big ticket items.
Nick Pinchuk: You know, after you've run the programs after a while, you know, on, say, like, hand tools and power tools and the other stuff, you know, you kind of got to recycle some. And so now we've found a new and pretty successful area at the lower end of that, you know, like Solus, which is way cheaper than, say, a Zeus, you know, or a Cart, which is way cheaper. I mean, it may be a factor of four cheaper than a big Epic unit. And so you feel as though that's the kind of thing you can focus on.
Speaker Change: After you've run the programs after a while you know.
Speaker Change: Until like hand tools and power tools and the other stuff.
Speaker Change: You kind of got a recycle some and so now we found a new and pretty successful area at the lower end of that like Solus, which is way cheaper than say a zeus.
Speaker Change: Or a car, which is way cheaper I mean, maybe a factor for cheaper than the than the dike.
Speaker Change: Big Epic unit, and so you feel as though that's the kind of thing you can focus on so we're kind of encouraged in that position and then of course, you double down and try to make sure that more of your.
Nick Pinchuk: So we're kind of encouraged in that position. And then, of course, you double down, you try to make sure that more of your. New product introductions are in the area where you can have effect. You don't want to spend a lot of time worrying about – so you shift resources from the top-of-the-line diagnostics, from things like – some of those are already in the pipeline sometimes – or things like Epic tool storage boxes or anything that's very expensive, and you try to hit that sweet spot and put most of your development and promotion sources in those areas.
Speaker Change: New product introductions are in the area, where you can have.
Speaker Change: Correct, you don't want to you don't want to spend a lot of time worrying about so you shift resources from the top of the line diagnostics from the from things like some things without some of those are already in the pipeline, sometimes or things like epic tool storage boxes or anything it's very expensive and they try to you try to hit that sweet spot and put most of that loss.
Speaker Change: Your development and promotion sources in those areas. So we continue to do that and particularly when we see this because what happened in the quarter was the program seems to work.
Nick Pinchuk: So we continue to do that, and particularly when we see this, because what happened in the quarter was the program seemed to work. The other stuff. So the general level dropped because of uncertainty. So we think we can hit, it's just a matter, that's why I say that stuff over ran us. You know, you can think about this, that program successful, the other products, sort of the underlying base dropped in this quarter beyond where it had been before.
Speaker Change: The other stuff.
Speaker Change: So the general level dropped because of uncertainty. So we think we can hit it just a matter that's why I say that stuff overran US you can think about this that program's successful the other products sort of the underlying base dropped in this quarter beyond where it had been before.
Nick Pinchuk: And so what we'll try to do going forward is focus on those in terms of product, then in terms of, we've got some ideas around getting to the customers, you know, we're constantly evolving the idea of social media and putting out a little shorter videos, kind of a version of TikTok, Snap-On Network, we're trying to do that, that tends to work for us, but we might have done that anyway, I'm not sure, Luke, you know, but I mean, that's where we'd allocate some resources. Got it. Um, you know, we've talked a lot about the technician side in terms of sentiment and just how they're reacting to the environment without franchisees and the folks that you're spending time on.
Speaker Change: And so what we'll try to do going forward is focus on those in terms of product that in terms of we've got some ideas around getting to the customers.
Speaker Change: Constantly evolving the idea of social media and putting out a little shorter videos kind of a version of Tick-tack-toe snap on network. We're trying to do that that tends to work for us, but we might have done that anyway, I am not sure, but I mean, thats, where we would allocate some resources.
Speaker Change: Got it.
Speaker Change: We've talked a lot about the technician side in terms of sentiment and just how they're reacting to the environment windows franchisees and the folks that you are spending time on I guess.
Nick Pinchuk: I guess I'm thinking especially, you know, things like cushion and how they might be thinking about working capital in their businesses, be it inventory, their payables, extended credit, those sorts of things. Yeah, you know, look, I think, I think Well, it's dad. But it's not bad compared to pre-pandemic level. You know, so and they're the same franchisee. So, I don't think we quite have, you know, even though, you know, this is not something we are cheering about or something like that, it's hardly threatening. It's not, it's not enterprise threatening for Snap-On. You can look at the cash flows.
Speaker Change: Making especially things like cushion and how they might be thinking about working capital and their businesses be it inventory their payables extending credit those sorts of yeah.
Speaker Change: Look I think I think.
Speaker Change: Well it's down.
Speaker Change: It is not bad compared to pre pandemic levels.
Speaker Change: So.
Speaker Change: And there are the same franchisees.
Speaker Change: No I don't think we quite have even though this is not something we are cheering about or something like that it's hardly.
Speaker Change: Threatening.
Speaker Change: It's not it's not enterprise threatening for snap on you can look at the cash flows I mean, the casuals down, but we arent wringing our hands over we're trying to figure out where to get cash we're not going to we're not going to step back from anything and most franchisees are in that situation now there are some in which the idea like always down at the bottom in may.
Nick Pinchuk: I mean, the cash flow is down, but we aren't wringing our hands over. We're trying to figure out where to get cash. We're not going to, we're not going to step back from anything. And most franchisees are in that situation. Now, there are some in which the idea is, like always, down at the bottom end, they may be threatened in this situation. We try to work with them to make sure they can survive this situation. That's another place where we'd spend time to try to make sure that the determinations, you know, the exiting and the franchisees stay right in the same place.
Speaker Change: May be threatened in this situation, we try to work with them to make sure. They can survive this situation.
It's another place where we'd spend time to try to make sure that the terminations the exiting in a franchisee stay right in the same place and more or less for government work. It has stayed in the right place at the same place. It is just in this environment, it's a little harder to get people to move because everyone who might be a franchisee is.
Nick Pinchuk: And more or less for government work, it has stayed in the right place, in the same place. It's just in this environment, it's a little harder to get people to move because everyone, you know, who might be a franchisee is, in fact, somewhat confidence impaired in this situation.
Speaker Change: In fact somewhat confidence impaired in this situation.
Nick Pinchuk: Got it.
Speaker Change: Got it thanks, guys I appreciate the color.
Nick Pinchuk: Thanks, Nick. Appreciate the comments.
Patrick Buckley: And your final question today will come from Patrick Buckley with Jeffries. Please go ahead. Hey, good morning, guys.
Speaker Change: And your final question today will come from Patrick Buckley with Jefferies. Please go ahead hey.
Patrick Buckley: Good morning, guys good morning could.
Nick Pinchuk: Could you talk a little bit more about recent dealer sentiment, I guess Liberation Day and all the auto tariffs for more of a Q2 event. So anything notable to call out there to start the quarter? Unknown. What do you mean by dealers? You mean automotive dealers? Yeah, and just demand for higher fend. You mean like semi-dealers? Unknown Speaker 3 No, the auto dealers. Unknown Speaker 4 Yeah, like, yeah, like a Chevrolet dealer or BMW dealer? Unknown Speaker 3 Yeah, exactly. Unknown Speaker 4 Okay. Look, I... I don't think we saw any particular move in that situation.
Patrick Buckley: Could you talk a little bit more about recent dealer sentiment I guess liberation day and in all of the auto tariffs for more of a Q2 event. So anything notable to call out there to start the quarter.
Patrick Buckley: Yeah.
Patrick Buckley: Uh huh.
Speaker Change: What do you mean by dealers I mean automotive dealers yeah.
And just demand.
Patrick Buckley: Humana Chevy dealers.
Speaker Change: No no the auto dealers.
Speaker Change: Yeah, like Chevrolet dealer or the other.
Speaker Change: Look I.
Speaker Change: I don't think we saw any particular move in that situation here's the thing.
Nick Pinchuk: Here's the thing. You know. In our orb, it doesn't really, for sure, make any difference what happens with new cards. Not for sure. In fact, the dealerships make, you're probably very familiar with this, because I think you look at dealers all the time, they make a lot of money on repair and spare parts, and used cars, they don't make so much money on new cars. So the new cars, if you have tariff problems in the new cars, or the auto companies are spitting up blood all over the idea, they got tariffs going back and forth, they can't, it doesn't make that much difference, I think, for the dealerships.
Speaker Change: You know.
Speaker Change: In our or it doesn't really for sure make any difference what happens with new cars.
Speaker Change: Not for sure and.
Speaker Change: In fact, the dealerships make you're probably very familiar with it because I think if you look at dealers all the time, they make a lot of money on repair and spare parts and used cars. They don't make so much money on new car. So the new cards. If you have tariff problems in new cars in the auto companies are spitting up blood all over the idea they got tariffs going back and forth in Canada and it doesn't make that much difference I think for the dealership.
Nick Pinchuk: Now, the dealerships moan about not having new cars. But I do remember during the pandemic, when they didn't have new cars, their margins were at an all time high. So I don't think being in the back shop, it doesn't affect us so much. And so I, when I talk to dealerships, they will moan about the worry that boy, if they can't get cars, they are going to lose some. And if, if asymmetrically they have less cars and say their competition in the area, they may lose the customer bases that they worked so hard to build up.
Speaker Change: That's now the dealerships moan about not having new cars, but I do remember during the pandemic when they didn't have new cars. There margins were at all time high I think so.
Speaker Change: I don't think.
Speaker Change: Being in the back shop, it doesn't affect us so much and so when I talked to dealerships they will moan about the worry that.
Speaker Change: Boy, if they can't get cars, they are going to lose some and if if asked symmetrically they have less cars and let's say their competition in the area. They may lose the customer bases that they worked so hard to build up there is that kind of thing, but I don't think for the near term that makes much.
Nick Pinchuk: There's that kind of thing, but I don't think for the near term, that makes much difference for our business. I don't think they pull back, they might, some of them do, but some of them actually think in those environments that they ought to invest and repair more. Because, you know, they're not going to get new cars, so they've got to get the cash flow out of repair. So sometimes they want to do that in a situation, so it's unknowable in that situation. I suppose the one caveat to that is, Patrick, is that to the extent we are commissioned by programs with the OEM, That could be affected by turbulence with new cars and all this noise with the tariffs.
Speaker Change: Difference for our business with them.
Speaker Change: I don't think they pulled back they might some of them do but some of them actually thing in those environments that they want to invest in repair more.
Speaker Change: Because they're not going to get new cars, so they've got to get the gotta get the cash flow out of repair so sometimes they want to do that in a situation. So it's a it's unknowable in that situation I suppose the one the one caveat to that is Patrick is that to the X.
Speaker Change: We are commissions by programs with the Oems.
Speaker Change: That could be affected by turbulence with new cars and all of this noise with the tariffs we haven't seen it so far.
Nick Pinchuk: We haven't seen it so far. Got it.
Speaker Change: Got it.
Nick Pinchuk: And then I guess, you know, looking at the tools group seemed like international sentiment was it was a bit higher than us. Could you talk about maybe some of the drivers there and the outlook for the international segment there? Sure. The international segment isn't worried about any of this stuff. They're not worried that Donald Trump's talking about Greenland and Gaza and, you know, the Panama Canal. They're not worried that, you know, they're, they're, they're really not worried about at the grassroots level, at the grassroots level. I don't think they're worried about, you know, the idea that, you know, they're going to tariff China 170%, or whatever they are 245%.
Speaker Change: And then I guess looking at the tools group seemed like International segment was it was a bit higher than U S. Could you talk about maybe some of the drivers there and any outlook for the international segment there sure.
Speaker Change: Sure.
Speaker Change: The international segment isn't worried about any of this stuff, they're not worried that.
Speaker Change: Donald Trump is talking about Greenland in Gaza and all of the Panama Canal.
Speaker Change: Theyre not worried that are.
Speaker Change: They're really not worried about at the grassroots level at the grassroots level I don't think they're worried about you know the idea that they're going to tariff China of 170% or wherever they are 245% I'm not sure. What the number is these days, but I don't think just so worried about that.
Nick Pinchuk: I'm not sure what the number is these days. But I don't think they're so worried about that, you know, and, you know, the it's kind of, it's kind of proportional to where they sit. So Canada is probably more worried, because the tit for tat with, with Trudeau, and so on. I think impacted them some. So and but if you look at Australia, the UK, they're kind of offshore, you know, and so that I don't think we see much of an effect in those places. And I think that's simply because the whole cash rich confidence poor phenomena has always been from the beginning, when we started to see it a US phenomenon.
Speaker Change: And you know.
Speaker Change: It's kind of it's kind of proportional to where they sit so Canada is probably more worried because the tit for tat with the with <unk> and so on I think impacted that some so and but if you look at Australia. The U K, they're kind of offshore and so that I don't think we see much of an effect on us.
Speaker Change: And I think that's simply because.
Speaker Change: The whole.
Speaker Change: Cash rich confidence poor phenomena has always been from the beginning when we started to see at a U S phenomena.
Nick Pinchuk: Great. That's all from us. Thanks, guys. This concludes our question and answer session. I would like to turn the conference back over to Sara Verbsky for any closing remarks. 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. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. © BF-WATCH TV 2021
Speaker Change: Great. That's all from US thanks, guys Okay.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Sara <unk> for any closing remarks.
Sara: 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: [music].