Q2 2025 Snap-on Inc Earnings Call
Good day and welcome to the Snap-on Incorporated. 2025 second quarter results conference. Call
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Speaker Change: Please note this event is being recorded, I would now like to turn the conference over to miss ceara verbsky, vice president of investor relations. Please go ahead, ma'am.
Ceara Verbsky: Thank you, talking. Good morning everyone. We appreciate you joining us today as we re
Speaker Change: do you snap on second quarter results, which are details in our press release issued earlier this morning we have on the call Nick pinchuk Snap-on chief executive officer and although pyari Snap-on Chief Financial Officer
Aldo Pagliari: Nick will kick off our call this morning with his prospective on our performance. Although we'll 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, snapon.com under the investor section. 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, or that otherwise discuss management or the company's Outlook plans or projections are forward-looking statements and actual results May differ materially from those State, 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 FCC filings. Finally, this presentation includes non-gaap measures of financial performance, which are not meant to be considered in isolation, or as a sub.
Sarah: Institute for their Gap. Counterparts additional information regarding these measures is included in our earnings release 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. Thanks Sarah.
Nick Pinchuk: Good morning, everybody.
Nick Pinchuk: As usual, I'll start the call by by covering the highlights. From our second quarter.
Nick Pinchuk: And I'll tell you right now.
Nick Pinchuk: We're encouraged by the results, resilience, and balanced against an environment that's been quite turbulent. It's like, it's like 1 long mad minute where the commercial ground keeps shifting. But with the resilience of our markets, the balance of our portfolio, our advantages and products and Brands and people, we navigated the roller coaster and exited the quarter stronger than when we entered.
Nick Pinchuk: So, that's my view.
Nick Pinchuk: And as we proceed today, I'll put you in with more color on our financial results. On our markets, the current environments, the progress we made, and I'll give you another take on what I think it all means.
And algo will move to a more detailed review of the financials.
Nick Pinchuk: Let's talk about the results.
Including 8.6 million in favorable foreign currency translation, uh, or organic sales were down. Uh, organic sales were down, uh, 710 to a percent and they were mixed. But overall balance,
Nick Pinchuk: Optical operating income for the quarter was 259.1 Million 7.6% for all last year which included uh 11.2 million from the non-recurring. 2024 legal win.
Nick Pinchuk: Oh, I margin was 22.0%. Lowered by 180 basis points versus last year, which included 100 basis points from that, uh, legal matter.
Nick Pinchuk: Notably.
Nick Pinchuk: The gross margin was 50.5% 10 basis points behind last year. Reflecting continued resilience rapid. Continuous Improvement, balance 50 basis points of unfavorable currency transactions in effect.
Nick Pinchuk: Our opco oi Gap, primarily represented our ongoing investment and maintaining, and strengthening our advantages and products and Brands and people, uh, believing as we did in the pandemic.
Nick Pinchuk: Just to emerge from the disruption that full strength. And we believe we're, on course to do just that
Nick Pinchuk: For financial services, operating earnings of 68.2 million. We're down 2.8% from last year's, 70.2 million and combined with the opco results. The overall oi margin for the for the quarter was 25.5%, which compared to the 27.4% recorded last year. Which included the the legal benefits this time was 90 basis points.
Nick Pinchuk: EPS for the quarter was $4.72 35% uh 35 cents below last year.
Nick Pinchuk: 16 cents from last year's legal payment was included in the 24 number and this year's level included 9 cents, impact 9 cents impact from higher pension amortization costs. In other words, there were 25 cents a headwinds In the year-over-year comparison of eps.
So now let's speak about the market. So those are results. But now let's speak about the market, we believe the automotive repair environment to continue to be favorable. We did see mixed, but improved results with the technician, the 2 group was up low. Single digits in the US Network, while the international Vans were flat
Nick Pinchuk: And from what we're hearing directly from the franchisee to the text from the Grassroots I believe vehicle repair emphatically remains a very favorable place to to operate in the industry metrics continue to confirm that view.
Nick Pinchuk: Miles driven, average vehicle age households. Spend on repairs Tech, town and Tech wages.
They're all up.
Nick Pinchuk: Now, the macro environment is still turbulent.
But the tech uncertainty has stabilized.
And having said that it remains significant,
And all that. However,
Nick Pinchuk: the tools group pivot does appear to be gaining traction. And overcoming the ants ants. You can see it in our second quarter results. We like, the way the numbers are moving.
It's a positive sign.
Nick Pinchuk: On the other side of auto repair where repair systems and information the RS and I group is displaying encouraging progress, expanding snap-on's, presence with repair shop owners and managers with particular strength in OEM dealerships.
Nick Pinchuk: Things are looking okay.
Nick Pinchuk: Upgrading facilities and you know the OEM dealerships upgraded facilities and equipment to match the growing complexity of the new models. Now there are there are pockets of hesitation on garage projects
Nick Pinchuk: With some independent shops thinking that delay is the turbulence is, is the right move. But in general,
Nick Pinchuk: The shops know that deeper complexity is rolling and the challenges are coming and they must be ready.
Nick Pinchuk: So in general, the second remains strong and you can see it all over the RS and I results. And for the critical Industries,
Not here.
We saw uncertainty and hesitation early in the period.
Nick Pinchuk: Liberation day and the weeks that followed create a lot of windage and and project planning and execution, many businesses adopted a wait and see approach waiting to let the trade program, develop before pulling the trigger and we did see postponements
Nick Pinchuk: The quarter progressed. However, the the initial shot gave way to what I would call, accommodation project Flow came back and I ordered a book has grown. So the critical industry is built momentum through the quarter and and they remain a very attractive place to operate. Despite what we believe may have been a shock Blick in the
Nick Pinchuk: order.
So I remember Marcus has continued to offer opportunities that we believe display moment.
Nick Pinchuk: Challenges do exist. There are headwinds, but we're confident with our advantages, and strengthening and strengthening product lines that solve critical tasks in our extraordinary brand that marks the serious, the critical in the professional.
Nick Pinchuk: So now let's uh move to the segment, the commercial and Industrial group was the place where most impacted by the shock early in the quarter, you know what it has the largest International presence and its critical industry division has a a substantial supply of project business. So the group's second quarter as a quarter volume decreased 6.5%, including 4.5 million in favorable, foreign currency translation and an organic sales declined. At 7.6%. Cni's, operating income was 46.9 million below. 2024 Levels by 15.3 million, operating margin was 13.45%, uh, down 320 basis points.
Nick Pinchuk: But we did see.
Nick Pinchuk: Upward motion as the quarter progressed.
Nick Pinchuk: As the as the customers accommodated to the environment.
Nick Pinchuk: So we're confident in committed to extending in the critical Industries and we'll and we'll keep strengthening our position with cni. As we move forward, observing the task using the insights created, to create products that that make work easier. A great example, is the next Generation. Our next generation of the Next Generation quarter inch, uh, Drive 14.44 World cordless ratchets. It increased power and speed 40 foot pounds of torque, for brake and loose stubborn. Fasteners, and once freed the tool is 400 RPMs, kick in and the passengers fly off. It's it's it's a real Time Saver. Our emergency in North Carolina plans. Just released 2 models of cp25 offering a, a compact frame and a CPR 27. When I spend it, next 2 tools to maximize efficiency with
Nick Pinchuk: To work in a hard-to-reach out of the way applications. And there are other great features of the tools. The brushless motors provide improved durability and longer run time, the variable speed trigger gives a tech more control.
preventing, you know, in this situation that over
tightening that can damage components and our Ring of Fire creates a 300 create 360 Degrees, a daylight beaming from 6 ledsome.
Nick Pinchuk: All of this serving to make both much easier.
The CTR 25 and 827 compact frame. The long neck designs text, love them. They know they need both of them and based on a strong recession, it's now clear to their their destined for our million-dollar hit product list.
Nick Pinchuk: Now, especially Torque business remains a red hot. It actually had a strong quarter part of the reason is that our lineup continues to expand moving to meet the increasing and, and, and complex challenges of essential bolting. And uh, and tensioning and recently.
Uh, we introduced the new ctm 550 unit, it joined the joint. So joined our growing area of cordless torque multipliers. This this tool is 66% lighter and 20% smaller than its Big Brother. The 1 inch ctm 800
Nick Pinchuk: And it it delivers effortless effortlessly he delivers torque all the way from 160 foot-pounds to 550 foot-pounds. It's ideal for tackling a range of tasks in a growing number of of heavy duty applications. That require precise torque uh the new tool
Nick Pinchuk: enables much greater efficiency and comfort it replaces. And it replaces the commonly used impact gun and torque wrench combinations with a single tool.
Eliminating several uh, you know, cumbersome steps providing a a much safer and more ergonomic path to repair if the design that combines the efficiency of our extraordinary norbar gear designs with the brushless motors or our power tools operation to make problem torque to make Precision torque at high outputs, the a breeze. And, and you know, the the unique, uh, Snap-on, Advanced cooling system. No pun intended means the extended use and increased durability.
The CPM also has the multiple connection options and enabling the accuracy of the pre procedure to be documented and reviewed and showing that the job was done correctly. And and that the uh
Nick Pinchuk: Boss or semi-truck, or or bulldozer will operate as designed and safely and without failure.
our ctm, 550 sophisticated powerful versatile with a Dior durability to, to tackle the harshest environments servicing the needs of the critical, and engine might imagine
it's been well, received
Speaker Change: Well, that's cni.
Speaker Change: Absorbing the shock moving forward.
Speaker Change: Delivering solutions that make critical work easier safer and more productive. Now, on to the tools group, organic sales were up 1.6% with low single with a low single digit Improvement in the US and the international Network flat to last year.
The operating income was 116.7 million and that compares with 114.8 million or 2024 with an operating margin of 23.8% flat to last year.
Speaker Change: Achieved Against the Wind.
Speaker Change: As I said, technicians are still cash rich, but confidence poor.
Speaker Change: A reservations were down 4.9% sales items like large tool storage box boxes decreased in the quarter but our connection was Grassroots customers indicate that the uncertainty is stabilized and over the period. The tools group pivot to faster payback items, gained Tech, gain traction against the continuing Wars, the rapid fire announcements in the capital, and the threats of inflation. All through the quarter, we kept working.
Speaker Change: Shift in production, refocusing marketing Market, marketing, and promotional campaigns. And most important of all introducing in Innovative new products that make an immediate impact offerings, that created a short-term Payback,
Speaker Change: so for Tech servicing uh growing comp uh uh SEC, servicing, vehicles of of growing complexity access is a big
Speaker Change: They need help reaching squeezing, contorting their way into compact areas, trying to make repairs, without the dismantling, things like Parts, like components like fenders, or grills or dashboards every day. We're there in the garage, observing these tasks, developing the solutions that make the work easier and more profitable. It's snap-on's. Principal value creating a mechanism is well in the during the quarter, the tools group launched a number of new products, each delivering unparalleled unparalleled access.
Speaker Change: And matching the customer's preference for faster. Paybacks 1 is the FDA s102 2, a 2 piece radiator. Pick pick.
Speaker Change: Set each unit is 7 in.
Speaker Change: And offer.
Speaker Change: unique Design 1 is hooked hook shape ideal for pulling hoses away and the other is straight perfect for pushing the coolant lines, free, the complete set is built on our in our Oakmont Alabama facility and you know, it might seem trivial
Speaker Change: But I assure you modern vehicle engine, bays are jam-packed. Hoses are no longer out in the open and now even basic repairs more often than not requires, we require removing fan shells, the shrouds or a range of other parts. But with these tools,
Speaker Change: the tech can extract the hose.
Speaker Change: With ease.
Speaker Change: Conventional setups have similar geometries, but they require much more space to function. Our new picks.
Speaker Change: The great access and they do save a lot of time and the text of a notice.
Speaker Change: Another quick, payback is our fkc, 72, uh, uh, 3 inch H, Drive, stubby, length, uh, hand ratchet, pollution on Elizabeth, and Tennessee plan.
Speaker Change: Our uh smallest 38 interactive ever. I mean it's tiny
Speaker Change: About the length of your pinky.
Speaker Change: And, you know, there are a lot of narrow passages in the car. Well, this stuff you can go wherever your fingers can reach. But even though it's small, it offers great strength, courtesy of snap lines, unique dual pole system, and the 72, tooth design, enables 5 degrees, 5 degrees, swing art, another access enabler, and the sealed head increases, uh, reliability keeping the debris that can Muck up the works from entering the gear mechanism. It's, it's another Snap-on must haves for serious checks and it helped Drive the pivot in the core.
Speaker Change: Perhaps best of all.
Speaker Change: Just release.
Speaker Change: The redesigned 15 inch extra long needle-nose plier set.
Speaker Change: Cold forged at our Milwaukee plant. Now, that's a process that's difficult to man to master. Uh, but if you get it right and Milwaukee is 1 of the few who can
It results in Greater strength and delivers tighter tolerances without additional and more costly Machining the long, the long plier neck reaches to restricted openings creating access and the cold forking process and the associated shaft strength enabled, 85% more gripping power than other models and that makes this tool a real Time Saver. I mean, if you drop a part in a recessed area, no need to disassemble the WordPress.
These units will navigate through the confined space and they'll grab the Lost component without letting go making sure of a quick making sure and quickly retrieval.
That's a, a great and significant advantage.
Speaker Change: Each of these new new products, make work easier and repairs faster. And all 3 have already achieved, what we call, our $1 million hit product status and meeting the tech. And the last quarter, we talked about this about the bottom end of the, the, uh, bigger ticket items after meeting the text and meeting the text preference. For a faster, payback tool storage, our plan, alvona Iowa released, a special offering our entry level K2 2422 Classic series roll table,
Speaker Change: Back is 55 inches wide, go from 1 piece welded body which is with reinforced corners and a 14 gauge steel. Bottom panel that supports a payload of 2400 pounds.
Speaker Change: Over a ton of tools.
Inches wide 1, 5 inch, deep for deep sockets. And a 3-inch drawer for sort of long fly bars and extensions the box is functional rugged and it's relatively economical
Speaker Change: I will get your attention in this hurray. It's it's the array of I pop and 2 tone. Paint schemes 1, a black case with extreme green doors and black trim.
Speaker Change: I can tell you it is bright. Any Tech would stand out with the with the with this beaming box in this space?
Speaker Change: Seriously just came out and it's already had significant demand.
Speaker Change: So that's the tools.
Speaker Change: Pivot.
Speaker Change: Gaining on uncertainty back to growth exiting on a quarter with momentum and great American-made products were the big drivers.
Speaker Change: now, RS, and I
Speaker Change: Sales in the second quarter of 468.66 million with an organic day and a 2.3%, a high single digit advancement and Diagnostics information and strong double digits improvements in our OEM businesses.
Speaker Change: operating earnings, uh,
Speaker Change: or RS. And I were 119.48 million up 6.22% and the operating margin of 25.6% was 60 basis points. Better than 2024
Speaker Change: Now, just a little fun fact.
Speaker Change: The oi margin.
Speaker Change: For RS, and I has increased year-over-year for 12 of the last 13 quarters 6th Street.
That's the rise of software and the power of RCI, boom shakalaka.
Speaker Change: Arthur and I shine through the turbulence, leveraging our customer connection and launching Innovative products 1 of 1 example is is the wrong Triton born in our San, Jose facility positioned in the middle of our intelligent, Diagnostics offering try and provide a wireless connection between the car and the handheld, text can move freely Around The Bay under the car, under the car inspecting, troubleshooting and testing without restraint and and this is important.
Speaker Change: It does that.
Speaker Change: Without losing the lightning speed, that's the Hallmark of our wire unit.
And try this 2 Channel, Lobster, Labs. Go now provide Zoom capability and this is crucial when when a weight waveform glitches happen in a blink of an eye, and they often do
Speaker Change: It's hard to catch on a standard unit. So Triton customers can now record. Playback the tests magnify the path the pattern zero in on the abnormally and identify intermittent problems.
It's writing.
Speaker Change: Flex, its flexibility speed Zoom capability, 8 Hour battery life for extended use and 4 times. The memory handling more procedures and data handling more procedures and data than ever the launch easily, exceeded prior releases, as you might expect.
Speaker Change: the game, this Gang Busters platform, uh, is is powerful and
Speaker Change: Hands, and it's a clear winner in the shops.
Speaker Change: All right, and I is on a roll.
Speaker Change: great diagnostic units, powerful databases Mitchell, Pro demand repair information, the
Speaker Change: planetary power of intelligence Diagnostics, effective, shot Management Systems, continuing upward progress, driven by great Hardware significant advantages of the software and
Speaker Change: The dedication to RCI.
Speaker Change: We're going to keep driving and expand our fees position with repair shop owners and managers offering more new products developed by our Valley creation process. And we're confident it's a winning formula.
Speaker Change: Well, that's our second quarter.
Speaker Change: Marked by both challenged and advancement cni now impacted by the shock of Liberation day and about of wait and see.
But some recovery is underway as a as accommodation develops.
Speaker Change: The tools group.
Speaker Change: The pivot to quicker paybacks, gaining traction, sales up 1.6% organically oi, margin 23.8% flat to last year.
Speaker Change: But representing the third highest in the group's history.
Speaker Change: Against the wins.
Speaker Change: And rs and I sales up 2.2% oi margin 25.6% up 60 basis points software rising and RCI. Delivering again.
Speaker Change: It all came together for overall sales to 1 billion 179.4 million, flat gross margins, 50.5% down, 10 basis points.
Speaker Change: Unfavorable and unfavorable currency transaction and the impact of value. Uh, volatile trade policy, balanced by RCI.
Speaker Change: And oi margins of 22% down 80 basis points, adjusting for last, year's legal benefit, primarily primarily reflecting the, uh, the conviction to keep investing in products and Brands and people.
Speaker Change: Strength, all achieved in difficult conditions.
Speaker Change: It was an encouraging quarter.
Now, turn the call over to Aldo Aldo. Thanks, Nick, our Consolidated operating results for the second quarter are summarized on slide 6.
Speaker Change: That sales of 1,179.4 million in the quarter were unchanged from last year reflecting an 8.6 million, organic sales. Decline that was offset by favorable foreign currency translation sales in our automotive repair markets, wrong with gains. Both in our franchise van Channel, and an activity with OEM dealership and independent repair, shop owners and managers,
Within the industrial sector for our cni group sales were down year-over-year, reflecting the economic and geopolitical uncertainty that occurred throughout the period.
Speaker Change: Consolidated, gross margin of 50.5% compared to 50.6% last year and included, 50 basis points of unfavorable foreign currency effects. Partially offset by benefits from the company's RCI initiatives. While Snap-on is relatively advantaged in the current tariff environment,
generally manufacturing products in the markets where they are, sold our cost can be affected by trade policies.
Speaker Change: In the quarter, we mitigated the effects of incremental, tariffs managing material and other costs so that there was no meaningful impact on Gross margins.
Speaker Change: With respect to the unfavorable foreign currency effects in the quarter, much of, this was due to transaction impacts of the year-over-year, strengthening of the Swedish krona versus the Euro and the US dollar as we have factories in Sweden, serving both the cni and RSI groups in cni, new manufactured cutting tools for our European and Emerging Markets. While in the artists and I are caroliner facility produces Collision products that are sold globally.
Speaker Change: Operating expenses as a percentage of net sales, Rose 170 basis points. 28.5 percent from 26.8% in 2024 mostly due to a non-recurring benefit of 11.2 million from legal payments, received last year and increased personnel and other costs including ongoing brand Investments.
Operating earnings before Financial Services of 259.1 million in the quarter compared to 280.3 million in 2024.
Speaker Change: As a percentage of net sales operating margin before Financial Services of 22% compared to 23.8% reported last year, which included a benefit of 100 Pages points from the legal payments.
Speaker Change: Financial Services revenue of 101.7 million in the second quarter compared to 10.5 Million last year. While operating range of 68.2 million compared to 70.2 million in 2024,
Consolidated, operating earnings of 327.3 million compared to 350.5 Million last year.
As a percentage of revenues, the operating earnings margin of 25.5% compared to 27.4% in 2024 again, including a benefit from the legal payments.
Speaker Change: Our second quarter effective. Income tax rate was 22.5% in 2025 and 222.6% in 2024.
Speaker Change: Net earnings of 250.3 million compared to 271.2 million in 2024 and net earnings per diluted share of $4.72 in the quarter compared to 5.7 cents per diluted share last year.
When comparing the quarter's earnings per share with the second quarter of the prior year, there is 25 cents per share of headwinds on a year-over-year basis. And the second quarter of 2025 the looted earnings per share included approximately 9 cents per share of increased year-over-year non-service, and net periodic pension expenses primarily from higher amortization of Actuarial losses. While the second quarter of 2024 included, a 16, Cent per share benefit from the legal payments.
Speaker Change: Now, let's turn to our segment results. For the quarter starting with cni group on slide 7.
Sales of 347.8 million compared to 372 Million last year, reflecting a 7.6% organic sales decline, partially offset by 4.5 million of favorable foreign currency translation.
Speaker Change: The organic reduction includes double digit. Decreases in the segments, asia-pacific and european-based panel businesses and amid single digit decline in activity with customers in critical Industries. Partially offset by a high single-digit. Rise in the specialty torque operation.
Speaker Change: Overall, the sales decline reflects a reduction in certain cross border sourcing activities and the current trade situation and the Slowdown of projects by our customers and some Industries and geographies including us Aviation and the military.
Speaker Change: % in the second quarter compared to 41.7% in 2024. This decline was primarily due to the lower sales volumes and 50 basis points of unfavorable foreign currency effects. Partially offset by savings from RCI initiatives.
Speaker Change: Operating expenses is a percentage of sales of 26.5% in the quarter compared to 25% largely reflecting. The impact of reduced sales volumes as well as increased personnel and other costs.
Speaker Change: Operating earnings for the cni segment of 46.9 million compared to 62.2 Million last year.
Speaker Change: The operating margin of 13.5% compared to 16.7% in 2024.
Turning now to slide 8.
Speaker Change: Sales in the Snap-on Tools group of 491 million compared to 482 million. A year ago, reflecting a 1.6% organic gain and a 1.2 million dollars of favorable foreign currency translation.
Speaker Change: The organic increase reflects a low single digit rise in the United States business while activity and our International operations was essentially flat.
Speaker Change: During the quarter, we believe our ongoing pivot to Shorter, period. Back items was successful in overcoming the continuing uncertainty of technician customers in the current environment.
Coach margin declined. 50 basis points to 48.3% in the quarter from 48.8% last year. Mostly due to 40 basis points of unfavorable foreign currency effects.
Speaker Change: Operating expenses as a percentage of sales improved 50 basis points to 24.5% in the quarter from 25% in 2024. Largely reflecting the higher sales volumes
Speaker Change: Operating earnings for the Snap-on Tools group of 116.7 million. Compared to 114.88% was unchanged from 2024.
Turning to the RSI group shown on slide 9.
Speaker Change: Sales of 468.6 million compared to 454.824% organic sales, increase and 3.1 million of favorable, foreign currency translations.
Speaker Change: the organic gain includes a double digit increase in activity with OEM dealerships and a high single-digit gain in sales of Diagnostics and repair information products, to Independent repair shop owners and managers,
Speaker Change: These gains more than offset, a high single digit Decline and sales of undercar equipment, including collision repair products.
Speaker Change: Coach margin. Improved 130 basis points to the 46.8% from 45.5% last year, primarily reflecting increased sales of higher gross, margin products and benefits from ICI initiatives.
Partially offset by higher material Freight and other costs as well as 40 basis points of unfavorable foreign currency effects.
Speaker Change: operating expenses as a percentage of sales growth, 70 basis, points, 21.2 and 20.5 in 2024, largely due to increase Personnel in other costs,
Speaker Change: The earnings for the RS and I group of 119.8 million compared to 1, 1 3. 6, 6,
Speaker Change: the operating margin improved 60 basis points to 25.6% from 25% reported in 2024 now, turning to slide 10
Revenue from Financial Services of 101.7, million reflected, an increase of 1.2 million from 100.5 Million last year.
Financial Services, operating earnings of 68.2 million compared to 70.2 million in 2024, Financial Services expenses of 33.5 million compared to 30.3 Million last year, the increase is primarily due to 1.5 million of higher Provisions for credit losses, as well as a rise in personnel and other costs as a percentage of the average Financial Services portfolio expenses were 1.3% in the second quarter of 2025 and 1.2% in 2024.
The second quarter of 2025 and 2024. The respective average yields of Finance receivables were 17.5% and 17.7%. Well, the average yields on contract receivables were 9.1% and 8.9% respectively.
total loan originations of 293 million in the second quarter represented, a decrease of 15.1 million or 4.9% from 2024 levels, including a 5% decline in extended credit origination
Speaker Change: The reduction in expenditure originations mostly reflects lower sales of discretionary, Big Ticket items, such as tool storage units.
Partially offset by higher originations associated with a successful launch of the new Triton Diagnostics platform during the quarter.
Speaker Change: Moving to slide 11.
Speaker Change: a quarter in balance sheet includes approximately 2.5 billion of
Financing receivables and 2.2 billion from our us operations.
Speaker Change: Receivables. The US 60-day plus delinquency rate of 1.8% is up 20 basis points from the second quarter of 2024. But down 20 basis points from the rate reported last quarter.
Speaker Change: Trailing 12-month net losses for the overall extended credit portfolio of 69.5 million represented, 3.46% of outstanding and quarter end, we believe these portfolio performance metrics remain relatively balanced considering the current environment now. Turning to slide 12
Speaker Change: Cash provided by operating activities of 237.2 million in the quarter compared to 3001.1 Million last year. The lower cash flow generation as compared to the second quarter of 2024. Largely reflects higher year-over-year increases in working investment and lower net earnings. Net cash used by investing activities of 46 million. Mostly reflected net additions to finance receivables of 26.4 million and the capital expenditures of 19.7 million.
Net cash used by financing activities of 170.9 million, included cash, dividends of 111.8 million and the repurchase of 250,000 shares of common stock for 79 million. Under our existing share repurchase program. As of quarter end, we had remaining availability to repurchase up to an additional 357.9 million of common stock under our existing authorization.
Speaker Change: Turning to slide 13.
Speaker Change: Trade and other accounts receivable represented an increase of 26.8 million in 2024 year end.
Speaker Change: They they sales outstanding of 65 days were down, 1 day sequentially from last quarter, and compared to 62 days at year. End 2024, inventory is increased by 54.3 million from 2024 year end primarily due to 37.4% and some investment intended to mitigate supply chain uncertainties.
Speaker Change: A trailing 12-month basis, inventory, turns of 2.4 were the same as year end 2024.
Quarter end cash position of 1,458.3 million compared to 1 billion, 363.5 million that year end 2024, in addition to our existing cash and expected cash flow from operations, we have more than 900 million dollars available under our credit facilities.
Speaker Change: There were no amounts mowed or outstanding under the credit of the sellers. During the year, nor was any commercial paper issued or outstanding in the year.
Speaker Change: That concludes my remarks on our second quarter performance. I'll now review a few Outlook items for the balance of the year.
Speaker Change: With respect to corporate costs, we currently believe that expenses for the remainder of 2025 will approximate 27 million per quarter.
Speaker Change: Additionally during 2025, as previously shared, we recognize and expect to continue to incur approximately 6 million dollars 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 expenses next on our statement of earnings, and we'll have about a 9 Cent per diluted share quarterly negative effect on EPS for the balance of 2025.
We expect the capital expenditures will approximately 100 million dollars and we currently anticipate that our full year. 2025 effective income tax rate will be in a range of 22 to 23% our expected range which factors in the US tax bill, that was recently passed is unchanged from previous estimates.
Speaker Change: Finally, in 2025, our fiscal year will contain 53 weeks of operating results with an additional week. Our current at the end of the fourth quarter, this occurs every 5 or 6 years and historically, it has not had a significant effect on our full year of work. Fourth quarter total revenues or net earnings, I'll turn the call back to Nick for his closing, thoughts, Nick.
Nick Pinchuk: Thanks Aldo.
Nick Pinchuk: Map on the second quarter.
Nick Pinchuk: Results.
Nick Pinchuk: Marked by resilience portfolio balance shock accommodation.
And progress.
BNI International markets and critical Industries disrupted by Liberation day.
Nick Pinchuk: The shock giving way to accommodation and and accommodation in the storm.
Nick Pinchuk: Or to this storm.
Nick Pinchuk: Tools group continued on certainty.
Nick Pinchuk: Again the pivot gaining some traction sales up 1.6% organically us up International flat. A return deposit. Oh I margins 23.8% flat to last year.
Nick Pinchuk: But among the groups strongest ever.
Nick Pinchuk: Ours and I continuing strength sales up 2.3%, organically Optical oi margin of 25.6% up 60 basis points, Rising again.
turbulence sales of the for the corporation were 1,179.4 million essentially flat in the difficulty Optical oi margin 22% down 80 basis points adjusting for last year's legal benefit with The Gap driven primarily
Nick Pinchuk: By spending to, to maintain full strength.
Nick Pinchuk: Preserving Advantage for when the turbulence of baits, an EPS $4.72 against, you know, comparisons against 25%, 25 cents ahead. When we believe the, we believe that that these results demonstrate our overall strength,
Nick Pinchuk: They also highlight our, our relative advantage in the turbulence of the volatile trade policy, strengths rooted, in our strategy of making in the markets where we sell and in our solid structure are broadly based facilities. 36 factories 15 in the US. And and in the considerable distributed know-how.
Nick Pinchuk: We make a version of of our products at almost every region, but especially in the US, we believe this Advantage is clearly on display in our quarters. Both margins of 50.5% down 10 basis points from last year.
Nick Pinchuk: but a shortall more than explained by,
Nick Pinchuk: 50 basis points of unfavorable currency that was off.
Nick Pinchuk: RCI.
Nick Pinchuk: We said we believe we're resistant to tariffs.
Nick Pinchuk: And we meant it.
Nick Pinchuk: and we further believe that as we move forward, we have, we have momentum as a shock received and we have Advantage due to deeply in our products continually matching the increases in complexity work, making it much easier advantage in our brand that really does
Nick Pinchuk: Mark the professional and displaced personal and Collective pride and dignity. Of course, advantage in our people dedicated capable battle tested and wielding the snap and Valley creation processes to improve every day.
Nick Pinchuk: To demonstrated in the court.
Nick Pinchuk: so, we believe that, as
We move forward using those strengths and hearing in our Enterprise will prevail against the difficulty execute on our abundant opportunities and move positively through the last half of 2025 and well beyond.
Speaker Change: Before I turn the call over to the operator, I'll speak directly to our Associates and franchises.
Nick Pinchuk: I know many are listening.
Speaker Change: My friends.
Speaker Change: I know that the encouraging results we just discussed was created by your efforts past and present.
For your progress against the turbulence. You have my congratulations.
Speaker Change: For the energy.
Speaker Change: You bring to our Enterprise every day, you have my admiration and for your confident and unwavering commitment to our future, you have my thanks. Now I'll turn the call over to the Operator Operator.
Speaker Change: Thank you. We will now begin the question and answer session.
Speaker Change: to ask a question, you may press star then 1 on your touchtone phone,
Speaker Change: If you're using a speaker-phone, please pick up your handset before pressing the keys.
Speaker Change: if at any time your question has been addressed and you would like to withdraw your question, please press star then 2
Speaker Change: And at this time, we'll pause momentarily to assemble our roster.
Speaker Change: And the first question will come from Luke young with beard, please. Go ahead, sir. Uh, good morning. Thanks for taking the questions. Nick. Um, want to start, um, just with the, um, big shift. We're seeing the tools group, on Q into 2q. I guess it's the benefit of hindsight. Is there anything that sticks out to you? Is, I guess what, I'd say, less normal in the first quarter in the tools group, or maybe particularly areas where you may have gotten caught a little bit fat footed in this environment, I guess, thinking through the lens of 2q now that
Speaker Change: Feels a lot more normal in terms of the company's ability to navigate this turbulence. Just, you know, what was do you think the most important area of internal execution, this quarter and should we think you can lean into that even more into the back half of the Year? Well, in part of it was, I think, I think the technicians I think you saw, I think there was some evidence that the technicians had more uncertain acceleration and uncertainty in the first quarter versus prior quarters.
Speaker Change: You saw got similar sentiment dropped from December to January by. I think it was 20 basis points, 20 points.
Speaker Change: The lowest since 22, since the last big, you know, problem with supply chain and it's still down, but it's the amount of a little bit. I I would say that the early days of the administration spooked at the Grassroots
Speaker Change: and so our, our our, our pivoting was going better, you know, which is been going, but that spooking that 20 basis, but it reflected in the 20 basis points and I I don't mean to tie it exactly to that
Kind of stabilized. They aren't affected so much by tariffs, you know, Liberation. They didn't affect them so much, so they're more sitting there and they're not much happens. Really? And and in the last, I guess the bombing of
Speaker Change: Iran happened, but that's not so much. And we we started to gain ground on that. That's what happened. I guess, the 1 learning we learned in the first quarter that we applied in the second quarter.
you might remember that I talked in a first quarter about, I think we can nibble into
Speaker Change: The lower end of the, of the of the big ticket items like the the uh, the Solace, and the first quarter was salute to Solus was pretty successful and we sold some heavy duty carts in the first quarter that were economical and so we did some more of that in a second quarter. I talked about it on the call that the classic series, you know, box that is, you know, cheaper than, you know, the other series and and holds a ton of tools and has these eye popping colors that was pretty popular. So I think we learned we can we can add to the pivoting to what the obvious Things Are.
Speaker Change: Hand tools and power tools. And
Speaker Change: Like that.
Speaker Change: Sort of eating at the bottom end of the big line and focusing on that. And I think that's 1 of the things we did. I'm not sure that keeps working because you always have to do some, some different things, but I think the pivot is now working pretty well.
Speaker Change: And I think we have momentum. I've I've said this in in this thing we we exited the quarter stronger than when we entered.
What about, um, what about the origination side of things that can just, um, you know, generating demand for new credit you mentioned, you know, in your script, the, um, you know, the benefit of diagnostic units that were, you know, we're seeing in that originations decline, moderating sequentially, but do you think there's an opportunity to get franchises to lean into credit a little bit more as we go through the back, half of the Year, know, your guess is as good as mine. I don't know, you know, you know what I mean? Look, I think
Speaker Change: I think this originations were better, you know?
Speaker Change: Like you know, for government work that like we're down half as much. That sounds, that's a tough statement, we're down half as much as we were in our first quarter. I think we're down more, this quarter, we're down, 4.8% 4.9% originations and, you know, certainly that would have been. The originations were somewhat plumped up by the launch of the the Triton. So tool storage was probably down more than that would indicate but I do. I I don't know how that goes forward. I think it's going to take a while for customers to kind of accommodate. But as we saw in the pandemic, which is really, I'm kind of talking about that with the, with the cni shock question. It's kind of like a pandemic event. Everybody got shocked. I think the, the, you know, the, the technicians have been shocked for a while, I think sooner.
Later when nothing new happens, they start to accommodate and they start to realize, well, you know, I'm worried. But nothing's really happened to me, you know, my wages, keep going up. And I start to say, I can take a few, I can tie myself to more normal situations. So I would expect that to get better as we go forward. Plus, I do think we're better at the pivot. We're getting better and better and better and better and better.
Speaker Change: So that works for us. I I don't know if I don't know if I need the originations to come back.
Speaker Change: Right away.
But I do think that eventually people, if nothing big happens, they start to stabilize even more. And people start to come back with a rejection, but I'm not predicting anything like for the next quarter. As, you know, Luke, I'm going to say this again because I said it at every third. So the third quarter is always squirrely harder to predict than anything. Because the, the, the the, uh, the uh,
Speaker Change: The, uh, sfc is during that quarter and that creates a kind of turbulence that you can never forget.
Speaker Change: So we'll see how it goes. But I like the way things are going. I'll tell you that you can see it in the numbers.
Um, maybe for a uh, turn it back. Uh, all the could you just give us? Maybe a few for some of the key and market trends within critical Industries in cni and um you know, as mentioned that momentum was much better. Exiting the quarter relative to uh, you know this more Co like shock can you just give us a feel for, you know, where that Runway was, uh, directionally, um, relative to getting close to a point.
Speaker Change: Broadly speaking, Luke, uh, April was much slower than what the full quarter turned out to be. So, as I said to improved as the quarter moved out, and, uh, we saw the biggest changes that say would be in the aviation and Military related. Non-defense, sector, things of that nature, but General Industry also started to improve. So, again, while down, yes, in the quarter, we started to see some signs of improvement.
Um got it. I'll leave it there. Thank you.
Speaker Change: The next question will come from. Gary prestipino, was barington, research? Please go ahead.
Speaker Change: Um, good morning. All
Gary Prestipino: right. Um,
Gary Prestipino: On earnings per share works for the quarter.
Gary Prestipino: In your narrative.
Speaker Change: I did not.
Gary Prestipino: Would you like to know?
Gary Prestipino: Yes, I would.
6 cents. Okay 6 cents negative okay great thank you. Then a couple of questions here the RS and I
Speaker Change: growth was pretty strong and you mentioned something about a new Triton platform.
Speaker Change: Um, could you could you maybe elaborate on that and and you know what, the price points are? And what are the differences with this platform versus what you had in the market before?
Speaker Change: Sure, look I I Gary I don't know if I can say the price price point on it. Yeah. Okay, let's say 4500 bucks, ballpark ballpark, 45,500 bucks might be. I don't know how we can afford to sell it for that number. But okay, around that number, you know, it depends but there's a lot of factors you know what, what what's our promotion, what is it? But let's say, you know, 45,500 to 5,000 something like that. It's going to. It is it's in the middle of the intelligence diagnostic range. It's right in below Zeus and above Apollo. And and the difference is is the differences are, is that it's wireless rather than wired and the big the big deal here is, is that
Speaker Change: Our wired units were, you know, their Hallmark was, they were like lightning, you plug them in, you started them up and they really rolled up. This 1 comes up right away.
Speaker Change: so and it's wireless so it gives you both the flexibility of wireless and the and the speed, you know, the the instant on of
Speaker Change: uh, of of, of
Speaker Change: We have a zoom feature on the you know, these things have 2 2 Channel skulls. So what you do is you put the scope on a car and you watch a waveform there, but the thing is, sometimes the, the the uh, the problems in the car, there's intermittent and very quick. They only happen for a little while and you can't really see them on the waveform. Click carefully until you zoom. Right in and look at small glitches and the zoom feature allows you to freeze it and move it in, you know, the the waveforms are Dynamic thing at first. So, then you record, it freeze it. Zoom in, and check text the glitches. That's a big help. And then it has, uh, it has a
Speaker Change: 8 Hour, battery life, which is pretty long. And, you know, you, it makes it quite, uh, quite, uh, usable. And then the other thing, I think that's, uh, that's different. Is it has 4 times the memory?
Speaker Change: So, the 4 times memory means you can store a whole lot of stocks, you know, like a lot of waveforms a lot of procedures in it, a lot of data from other things, and it helps a lot of technicians really like it. I, I, you know, I just was out with franchises in, in Connecticut and the, and Atlanta.
having dinner with a bunch of these guys and then, you know, they're all
Speaker Change: Franchise, these are pretty fun.
Speaker Change: And they love this 1.
Speaker Change: They love selling it and the text seems to like it too. So we feel pretty good about it. So pretty well for, you know, for the the launch look was baffled.
Speaker Change: So we'll see how it goes. We like it, though. I mean, it's it's coming in an impact.
Speaker Change: No, that's good. Good to hear. And then just lastly, um, in the cni group. I I think you called out that the international operations, you know, were sluggish. Um, did the US kind of mimic that, you know, I'm not sure how many, how much you do in us and c and I but I get an idea. Yeah, the C and I see and I roughly
Speaker Change: See, and I have 50.
Speaker Change: You know, Europe tops.
Asia, you know, are well, you know Asia. We ourselves said we're not important anything from China. The thing is 170, there's 170% tears. Remember when they were 170% we just said no. So Asia is very rare for me uh, discombobulated in this situation. Not to mention, you got the, you got some other markets Disturbed, you know like the South Korea they just arrested the old president, you know, and everybody.
Speaker Change: This morning and then in Thailand they just declared the the former the the new prime minister a traitor and took her out of office. So things are pretty turbulent in Asia I was just there.
Speaker Change: And the markets are pretty bad. You look at Europe, I mean Europe is again across border, uh, position. They've got they've got GDP and UK was, 0.1% GDP in Germany, 0.3% GDP and change Spain. 0.5%, Europe has got problems. I think, at least for us we're seeing that. And then in the United States, really what happened
Speaker Change: European businesses.
Speaker Change: And the Asian business.
Line share, which is in.
Speaker Change: Which is the big slide.
Speaker Change: And these things you think about it. Okay, Liberation day happens, we're going to have terrorists. Well, the terrorists changed 3 times for China in a month of April.
Speaker Change: And then and then nobody they come out with 46% from Vietnam and then they say, oh, never mind, it's going to go to 10% until July 9th and then July 9th, they come out and say, well, it's 40% and 20%, but we're not sure because the 20% is for is for uh, direct. You know, the standard stuff and 40% if you have trans shipment. So people are sitting there saying it's a very interesting phenomenon. It's a little bit like the pandemic. I would say it's kind of it's kind of not congruent to the pandemic but it's similar you know if you have projects and they're thinking about doing things you're saying I'm not going to commit to very much because I don't know where the world's going to be and I kind of have a feeling that there's a pretty close Horizon and it's going to resolve itself.
Speaker Change: So that means that what people back particularly in the early parts of the, of the the quarter, you know, when people just said, geez, I don't want to commit. I look like a portal if I make a mistake.
And so you saw some of that working through the working through the system especially in a project. Now all this
Speaker Change: Our order kept getting stronger.
People just didn't pull the trigger for delivery.
Speaker Change: And so we like the order book, it's just that, you know, people have to figure out how they're going to accommodate the tariffs and people are gradually coming and they did with the pandemic. That's what happened to the pandemic at first people panic, you know, then then everything started.
Speaker Change: Thank you very much for that.
Speaker Change: The next question will come from, Christopher Glenn with Oppenheimer. Please go ahead.
Um thanks. Yeah, a lot of a lot on that last topic but just uh maybe a little follow up um, you know, description of upper emotion through the quarter. Uh
Speaker Change: Seem to center a little bit on critical Industries in US project timing but I, I think you said it really spin Apec in Europe. So just wanted to clarify, if that motion really spanned all those categories,
Speaker Change: Well, age is going to take a lot longer to deal with I think because you know you got those just what I said. I mean that you know they got the political turbulence is in a bunch of different places and you got China which is a basket case. China is really screwed up. Huh?
Speaker Change: And and and so you got all that stuff in Asia and on top of which, you got the cross border flows, which everybody's trying to figure out what to do, including us, you know, we're not taken care of, but we got to figure out what to do with our plants in China. You know, if we don't want to use them in the United States and we, we, we sell in Asia, you know? So we got to just, you know, help them a little bit.
But I don't think that gets, uh, just by The Liberation day situation in Europe is more like that.
Speaker Change: Really was talking about mostly just in our last, you know, discussion really about the critical Industries business and their Project based businesses.
Speaker Change: That's what I was talking about when we talk about this. When we say that the that we exited the quarter stronger than when we entered. We kind of mean the tools group as well. Huh. You know we mean as I can do me the to
Speaker Change: So, we're actually talking about C and I am the tools group, but if C, and I, it's most pronounced in the industrial business, which, by the way, is the Big Kahuna engine in the cni business.
Speaker Change: Perfect. Thanks very clear. And um, then I just wondering about Capital um, get a nice neck, cash position here, any comments on the state of the acquisition Pipeline and update on types of focus that inorganic bis development efforts are taking lately.
sure, we, we got a, we got a bunch of stuff looking at, I mean, you know, I, I, I think you can, you know, it's no secret that we have a, we have a pretty large landscape or or, uh,
Speaker Change: you know, landscape of Acquisitions that we look at every, you know,
Speaker Change: Constantly and, you know, generally there's not much to acquire around the tool group.
Speaker Change: Probably you don't look so much at age of these days because who the heck knows what's going to happen there, you know? And so you're talking about the expanding, the repair shop owners and managers or extending the critical issue. Those are the areas you look in more or less. And we're looking at, you know, several places. You know, sometimes as we peel the onion it looks like hey these guys are only 20 or 30% of us and we don't like the other stuff sometimes.
Speaker Change: And in this situation, of course you want to be pretty careful. You don't, you don't want to acquire something and then wake up and figure out.
Oh, you know the tears aren't looking so good for these guys, you know. So you want to be more careful and due diligence. I'm not saying I'm not giving you any future.
Bargains. But you're worried about what you might buy, you know. And so you want to be very careful and due diligence and we are we take care of our money.
Great, and then, uh, sot. So sounds like the, the sentiment moved up the bottom, a little reconciliation in the mindsets there and escalating of your your pivot work going well. Uh, just wanted to see if any other factors layered in, you know what what's selling versus sell through and, you know, is there any restock or maybe price related, pull forward that came to bear. I don't think there's any of that. Actually, our prices were pretty normal.
Speaker Change: you know we might have had a little more pricing in Canada than a normal maybe you know because of the situation there we can always price if we get
Speaker Change: You know.
Speaker Change: But generally we're resistant to that stuff. You might see some of that in Canada but and and Canada actually were okay in a quarter. So that wasn't Afflicted. I don't think I don't I think you saw it. I mean, I think the international business is kind of mixed
Speaker Change: And so that was flat, I think the big news is us up.
And that was driven by the pivot. The hand tools were pretty easy. That's why? And and, and the Diagnostics business is pretty successful. So those 2 things made made hay in the situation, and we liked that idea. And I think, you know, we felt, you know, if you look at the structure of the quarter for the tools group, we we exited stronger.
Speaker Change: That's simply it. That's no prediction. I've already said that. The third quarter is squirrely, you know, but generally, I like the direction we're going there, it seems like, and and I think as simple as this
Speaker Change: We've been pivoting, we're getting better at it, but the but the uncertainty is kind of stabilized. So if the uncertainty stabilizes every month, we gain ground on it,
Speaker Change: With the pivot.
Every month, great.
Speaker Change: Thanks for all that.
The next question will come from Scott stember with Roth. Please go ahead.
Scott Stember: Uh, good morning. Thanks for taking my questions as well. Uh, just to clarify, um, I guess there was a question about maybe selling versus sell through if I thought I heard correctly. But could you talk about tools? I know there's a lot of new products that are out but sell into the Channel versus sell off the vent in the quarter.
Yeah. Look I
Scott Stember: They're about the same. I think the the
Scott Stember: off the van were a little little bit lower, you know. But that would be expected when you have the kind of you know I've described to you exiting stronger than when you entered.
So that would mean, it takes time for stuff to get through the Vans and to, so therefore, you would have that kind of effect naturally generally, we haven't seen turbulence, we haven't seen in all this turbulence, really much variation for. You know, if you look at bigger periods, a quarter is a kind of blip in that kind of view. You know what I mean? It depends on what's launched when it's launched when it hits our vans. And then when it you know and so
Scott Stember: a lot of things like that, so,
Scott Stember: I I I think they're pretty much in Balance this time as I said the actual numbers are a little lower but that would be natural expectation given how we've described how the quarter with
Speaker Change: Got it. And then, um, you talked about some of these um, higher ticket items uh or low less expensive, uh, higher ticket, category sales, that you're seeing. But what were the, I wanted out of the experience. That's right. He was diagnosed with the leader, um, in tools in the quarter,
No hand tools was deleted, okay?
Hand tools was the leader, but it handles that handle that. That's why I spent so much time talking about hand tools because the hand tool is a great. That's those pliers are great. The the the cold Forge pliers, unbelievable. You know, the strength of those things and Milwaukee is probably 1 of the only places in the world that can do that.
Speaker Change: So, we really like that kind of thing. And I see, it doesn't mean much to, you know, if you're like us, you know, like me anyway who pushes the pencil all the time, but
Diagnostics, you do pretty well.
Don't don't get me wrong, the Triton was stupendous, but to storage down, you know, and stuff like that, we it it every quarter, there's a new story about the product.
Speaker Change: I think generally though the big thing is the overall number and I don't want to, you know, I don't want to interrupt the call without
Speaker Change: Re-emphasizing.
Speaker Change: The bellweather number.
Speaker Change: And that is 50.5%.
Think about that 1 for a minute and you see that boy that that just lays out, what we did, what we're doing we're doing, okay? We're winning the battle at the at the at the point of sale and we're brought since sales are a little you know, aren't are flattish. We're still spending more because we want to keep at
Speaker Change: Building our advantage and product and brand and people we're hiring a lot. We hire more engineers and ours. And I
Speaker Change: No kidding.
Speaker Change: The margins of up 12 of the last 13 quarters.
Speaker Change: Right? And just last question, on tariffs, um, nice job on, you know, essentially mitigating everything in the quarter, but could you dimensional
Speaker Change: What the headwind was. And as more tariffs start flowing through, um, you know, how much bigger that can get in the back half of the year, I'm not, you know, I I just, I swore, I was not going to do that because I think, you know, I'm not going to do that. It's, you know, it's hard for me. You know, we can make changes every day and mitigate, and the thing is every day, something new comes up. I got I got somebody Scott who every day writes, the a paper on what comes out of Washington, and we have to review it because the tariffs are always changing. Your guess is like this is mine. So we have to, we have to move with a lacquer against it. So it's impossible to predict
Speaker Change: And and all I can tell you is I like our position versus any of that stuff.
Speaker Change: Our position is pretty good. We we make in the markets where we sell now. We do have some exposures. We got to resist but we know how to make everything almost everywhere.
Got it.
Speaker Change: That's all I have. Thanks again.
Speaker Change: Good. The next question will come from David MacGregor with Longbow, research, please go ahead.
Speaker Change: Say good morning everyone. Uh, congrats on the progress next. Thanks. Hey, good morning. Um I guess just on the cni business. You talked about the project delays and and uh how that led to some order backlog. Um just talk about the timing of of that realization. There is are those projects that now that people maybe are feeling a little more? I don't know how much more confident but maybe a little more confident that we see those projects fulfilled here in the second half. Or is this just kind of an indefinite push out?
No, no, no. Look I
Speaker Change: Understand all the nuances. But in reality, I was talking about the delays, you know, people didn't pull a trigger. And I'm also talking about the orders, impacting us,
Kept going and doing well.
So I didn't pull back on ordering so much as I told you know, on delays and projects we expect to go. I don't
Speaker Change: I don't know about that. I think.
Speaker Change: It. I do think things we exited the business stronger than when we entered.
And that's an important factor, it's hard for me to predict the structure or or I guess the the the slope of that curve.
Speaker Change: you know, it's hard for me to put it but what happens is, what happens in the pandemic and I think this is a very similar
Speaker Change: You know, thinking people start to look at it and they they start to be comfortable with the environment and they start to figure out how to just deal with it.
It's sort of like, it's sort of, like, all of us in business, like, you know, you know, things start to happen. And you, you know, the waves are going up and down and you figure out how to navigate the waves after. Well, first you get seasick and then you get used to it and you figure out how to do it.
Speaker Change: And so right right right, I think that's what's going to happen. I think we're sanguine about it.
Speaker Change: But I can't predict, you know, anything like that. I do think I do think that business is
Speaker Change: Strong though. Anyway yeah even sounds like it despite the numbers.
Speaker Change: Despite the numbers, this quarter.
Speaker Change: Let me ask you about the tools business, you know, there's obviously been a lot of moving Parts. There's um, a lot of tumult in that space. But there was a time when you thought the tools was a, a 4% grower on a long-term basis, is that a number that you're starting to feel a little more comfortable with is, is achievable on a sustained.
Speaker Change: Basis. Or is that still something that? I mean, look, I think I think,
Speaker Change: If you look at our numbers over 20 years, you'll find that that's kind of what we've done, you know, and the profitability but the profitability has gone up regularly and that's really been the secret to Snap-on. We've been growing in the range. We said,
Speaker Change: Over quite a long period of time. You know there's ups and downs and our profitability is moving upwards and so I I do think the tools business sees that kind of thing. And this was kind of a little unusual because you had these this uncertainty go. I think there was a good reasons for it though if you looked at the environment particularly now. And so I I'm pretty confident about the tools.
Speaker Change: I think, you know, when I talked to a branch out of these, they seem pretty neat when I talked to the customers. They seem to like our products
I feel, okay, I I think.
Speaker Change: You know, we have to keep executing. We have to keep working. I think we're good at it, but we have to keep getting better at it.
Speaker Change: And but I have no doubt that the tool is going to go upwards.
Let me just go back to a previous question about, you know, cash and and capital allocation. And, and you talked about, you know, the m&a funnel looked good. But historically, you know, you've been a
Speaker Change: I mean, you've done smaller transactions. You snap on a state away from large Acquisitions, you've got a net cash, balance sheet, you know, strong free, cash flow prospects, maybe a billion dollars annually. Uh, you know, you just completed a large capacity buildout program. Uh, you're not a particularly large share researcher, although maybe that changes here going forward. Uh, would you consider a special dividend or a tender offer for shares? Or is there a possibility? We'll see larger Acquisitions. How, how do you put the cash to work next?
Speaker Change: uh, look I think
Speaker Change: well, I still think we're on certain environments.
Speaker Change: And so I don't mind having cash.
Speaker Change: You know, I don't mind having it. I mean I do think I have confidence in the future but I still don't and I do believe. I know he we do believe
Speaker Change: We at 1 of these points will find a big acquisition.
We just think it's a matter of time now, I've been here a long time. We haven't found 1 because everything we looked at is just been a little bit flawed and we, but we are not afraid to acquire anything big.
Speaker Change: Our management team is quite capable.
Speaker Change: The only thing is I'm telling you, we won't acquire anything that's transformative it will require things that's consistent with our coherent growth models and we do think there are things out there as they became available.
Speaker Change: Yeah. So I I having said that we always review on a periodic basis and you know more than once a year, you know, regularly we review the capital, you know, allocation process.
Speaker Change: But right now I don't see as a contemplating, any of those things, but we'll see, you never know.
Speaker Change: Good. That's it for me. Thanks very much. Okay.
The next question will come from Brett Jordan with Jeffrey's, please go ahead.
Brett Jordan: Hey, good morning, guys.
Speaker Change: I'm a collision segment. I think you sort of called out that it remains weak is, is that a structural problem or is that a cyclical problem? Is there a lower demand for repair with Adas? Um,
Speaker Change: No, look. I I don't know. You know, look, I'm not sure. I I think though that Collision might come under the group of, you know, a lot of it is the, you know, as you're Mr. Collision. You know, this becomes better than I do, you know. But but the thing is you got a lot of those big multi-store operators that have been building up
Speaker Change: And our, our view of the world is they got a little spooked lately.
Speaker Change: And for maybe a variety of reasons, they're not investing as much as they used to, that's our view of the world and so that may be true or not. But that's what, that's what our Grassroots kind of says, you know? And so we kind of believe that's a factor. I, I think that's in Collision, that's the big factor. I think that's changing that Collision, making it a little more. Tepid now, it has been incandescent for a long time as you probably know. There was a lot of movement and maybe you're talking about people not so much.
Group that saying okay I'm going to, I'm going to consolidate, I'm going to, you know, consolidate my gains for a while and then start to move on. I don't know. We'll see what happens.
Speaker Change: Okay. And then a question, I guess, as far as the franchise event Outlook, I mean, obviously, a slightly harder comparison on Q3 against a pretty strong, um, franchise event last year. You know, any color as far as like what the attendance is looking like, I mean, it's coming up in a month or so. Um just know. I look I think that I think the
Speaker Change: I don't know. You know, I look this is our 250th anniversary, so, 20th anniversary 200, what am I talking about, 1050? And I think maybe it could be a little bit bigger.
Speaker Change: I don't know. We'll see what happens. We kind of our planning for it to be slightly bigger, but it is, it is a it is last year, was in Orlando and this year, it's in Orlando for a number of reasons. So you never know how that's going to go over. But we expect a pretty robust, you know, as a robust this last year. Looking now, you never know, Brett until the last few weeks because a lot of the, a lot of the votes come in at the last few weeks. It's
Like waiting for, you know, like, like an annual meeting. A lot of the votes come in in the last day, so, that kind of thing.
Speaker Change: But I do think it'll be pretty robust. Now having said that though, the sfc, you know, it's great. You, you know, you like that and there's always enthusiastic, you can't go away from the sfc without feeling good about Snap-on. But the or it's only orders
Real sales.
You know, get high orders are better than getting a stick and you know, in the odd with getting a sharp stick in the eye, but they're not defending. They're not fully definitive, they're just directional.
Speaker Change: All right, great. Thank you. Appreciate it.
Speaker Change: Okay.
Speaker Change: This concludes our question and answer session, I would like to turn the conference back over to Miss Sarah verbsky. For any closing remarks. Please go ahead.
Thank you all for joining us today. A replay of this call will be available shortly on snapon.com as always. We appreciate your interest and Snap-on good day.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect