Snap-on (SNA) 19 Jul 182018 Q2 Earnings call transcript

Good day and welcome to the Snap-On Second Quarter 2018 Investor Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Leslie Kratcoski. Please go ahead.

Thanks, Jennifer, and good morning everyone. today in Snap-On's earlier our us which quarter this joining detailed are press for to second review results, morning. Thanks release issued

thoughts, Chief provides on Pagliari, detailed financial on take Officer; our Nick a we'll call have the more with today review some Aldo off Pinchuk, We results. his will morning perspective provide call will kick our and performance. questions. After Chief Snap-On's Snap-On's Aldo closing this Financial our Nick Officer. of your Nick Executive then

we've provided along during can forward-looking management's These Company's as or results section. snapon.com, and or relative usual, statements today's the management's with to the Downloads Any slides As are estimates website, the may discussions. state to such Investor materially website, transcript those viewer These of projections be beliefs tab statements, call. otherwise slides or made this call supplement will slides in well webcast or the our the our from statements. as actual be differ on accessed archived plans made under under outlook, our in on expectations,

in in Additional results to those cause information could statements the filings. SEC our forward-looking the are from materially and differ factors contained our that

includes counterparts. Finally, in meant to isolation performance, measures be non-GAAP this GAAP which presentation considered for substitute or financial of are their not as a

reconciliation non-GAAP With call Nick is now measures website. Nick? of a the I'll included earnings including on measures, which deck, over slide conference turn these can release said, to our regarding and information be Pinchuk. Additional that call our in found

everybody. morning Good Leslie. Thanks,

financials. the that and headwinds its to we headwinds about We our results will into with second highlights see, the variations. of the some start further demonstrated encountered review the ability general trajectory the we period I'll coming we’ve and and have of a more our period continue usual, Snap-On's quarter the believe progress quarter. made. I As of of will speak trends move positive Then environment, some of Aldo detailed over

quarter, every the below had group. to and The and We’re down group encouraged strength critical in business gains still remains some within segments overcame from geographies industries our diagnostic forward and group in once broad we Those the moved progress but across disparity software our in trend, again. period, results. again variations van us by Like rise network, our the each gains and some overcame a these van and business. products

They or up translation quarter business. to Our currency reported million including XXX.X an this and incremental last XX.X X.X from million of of XX sales also the million. X.X% FASTORQ foreign Norbar were year's reflected including positive million operations year’s acquisitions,

value XX that basis basis from points of drag drive ability lower OpCo XX Snap-On for the margin the profitability points currency, strong and activity demonstrates consistently XX increase over XXXX diagnostic the and of was The XX% sales our organic for Now, higher information of margin X.X% margin in critical areas. some reaching a basis industries product, XX.X% favorable including points creation time, first growth. repair an representing with earnings in acquisitions that unfavorable rose and

million operating consolidated income points. raise to similar XX margin For to XX.X with up combined grew basis operating last was of financial from XX%. Earnings $X.XX the result OpCo of services, U.S. that year's per share, including million our legislation. recorded to implementation XX.X%, XX.X to tax they the benefit year, of up reached from rise the a a EPS $X.XX $X.XX related That last

we sequential opportunities the we perspective, see growth, From do those arena are but do favorable. Tools So macro an advancement. see improvement we overall believe The repair remains to further numbers. Group didn’t automotive for the and return did

and leading and repair the database progress for The RS&I advantage of repair. Group tools, of midrange the across RS&I's diagnostics, rising its repair and of hardware and a independent manager in in new on products Snap-On requirement intelligence in of two like vehicle Snap-On offerings capitalizing verses encountered area, supplements decline data to the like the array innovative and take business. equipment trend, and unevenness products information solutions to of repair system we the RS&I information that our like has in software, despite very ProDemand period year a quarter. And data repair that strong well diagnostic package. a served diagnostics those incorporating growing repair other and order arena of side handheld Higher repair continuing software activity, sales in improving and areas information Mitchell X data like the software Apollo

For Asia sales and improvement almost the the also places European aviation, digit geographies, growth, across general organic single our countries Pacific critical solid commercial growth and resources, mid key in up quarter solid around and industrial registering SNA business military Group, Europe, double strengthened Indonesia Japan. were hand like another industry, world for and sectors progress like C&I. in our the or digits, of industries sales natural every sector division the India, and organic encouraging increase C&I delivering and tools

sequential challenges critical So, borne undercar The it. improvement. and the to and results the In gains opportunities value RS&I custom back products, principles our of the connection, challenges together which by our overview. in results the again results product ongoing in once growth. demonstrated customers' again. margin at rapid creation, RCI C&I. and and observations but out favorable. that's overall, innovation insights offset the safety, Well, development progress remain the show industries gathered our uneven and workplace margin the and continues way guiding quality but equipment the organization information with operating clearly the propelled of of leverage in advancement drive in the and helps diagnostics The improvement, income Tool macro Group, out power by the not Snap-On and Those product are solutions, the of strong

from X.X from operating offset from sales will including up organic XX volumes to million rose favorable point million recent Volume reported C&I In basis basis by in X%. of and C&I the those impact acquisitions. XX.X%, as improves Group, RCI XX income foreign a X.X% unfavorable currency and points points move rise to were a of X.X let's currency The Now, basis FASTORQ XXXX. and the segment. XX from Norbar

the division, the progress gains products to saw industrial at reasonably critical macroeconomic with was driving quarter. most the critical of coupled geographies the a array We in conditions industries most For new and that an path are continuing. and across with positive sectors broad digits they believe those the based advancing double

tool been product, avoiding It's in in so our foreign and a many Iowa Arkansas critical object keeps great took the and plant. system places, of industries damage of and of our extension made customer the industries smart that control of of Conway ATC it forefront repair critical been automated Algona, of tool, demonstrations attraction keeps track box and that's one innovation Speaking has important evolving. our

our and Just the critical Snap-On Industry, and recently this been access increasingly quarter, adding for Sturtevant spearhead fingerprint direction. important top tool in acquisition the Precision ATC, torque line already ATC's the products card that international adaptability the launched and application combined ID to becoming it's expands a digital City DTC. we enabler in of that operation, California and control control a trend. In ongoing Illinois significant that critical torque with are a making new Richmont to Richmont support torque capabilities in our we're it and basic situations, building of facial helping feature Snap-On access at torque recognition a protocol in also system the is recognized match stronger. industry, our -- extend to series, a have spearhead, We've placement. Sturtevant

The the Carolina half U.S. quarter, from early inch it. wrench, Sturtevant digital control a at often have gives to We wrench feedback critical series space where last as combined head a DTC the at torque Richmont in the micro the another North dimension facility PTXXX more City right the in our and tightened impact quite size we our assembly to technician customer to us in power late in valuable tool, line. interchangeable Murphy first electronics we sell and Industry, ability new heavy they've operations is introduced torque here of facility heads moves pneumatic the In It application-to-application. manufactured package confirms a new is of adapt compact the been of winner believe

moving You pounds in introduced foot might year, remember while for also that power sibling, the top down strong at tech of about to we little To less power of package its tool, from runways last the XX little critical growth, June, hear reception. for line relatively waiting the we entry attractive It's and XXX Murphy PTXXX to light power, top top introduced late things economical. the love a the in driving promising still the course an C&I accolades profitability. a quarter, more little go-to-tool industries it. Well, PTXXX its aimed technician professionals, and pound, X.X level plant, good extending its and

onto and single Organic of down international actions Tools groups XX channel, by results. believe margin the Operating to earnings points, essentially to basis X.X% the reflecting decline X.X%, our and fruit. OI OI van down our reinvigorate primarily million, the low the bearing flat do XX a We X.X% lower digit Now strongest. sales Group. but U.S. XX.X% and among still in down

high affect another they showed operations. increase some Lead didn't progress, authoring -- franchise positively increase, the increase sales. the new software KCPXXXX made create recovery. storage handheld margin by in mid range and diagnostics they overall quarter by did an This but Tool U.S also

ZEUS data builds rollout units we grow that intelligence with unit feature, quarter. diagnostic sales As software penetration, package sales more Apollo again of this the and revolutionary accompanies most those our software the did and

It up Tools You the Group's point. can XX.X% in it a rose to XXX basis margin. gross see

growth. also positivity evident metrics, again published interest numbers. advancements formula reflected quarter publication, of strength new ranks, like international and magazine franchises our support, also a favorable finished again remain the was size cost choice factors acknowledge by using the in evaluate points products, other abroad. XXX regularly, own global and XXX measures XX, number in do as of stability monitor big favorable currency, franchisee both are in two our and in listing beyond this June. and that our outside indicators We just list up and from strength, areas, entrepreneur fees, U.S network and Now we by they and but branch do We of from we not Snap-On financial strength, data impart financial boost power global the top Entrepreneur that spots health franchise see franchisees the a continuing franchise the top

turning greater help reflects I achieved FDX, the franchises success about end the spoke without is clear recognition in grips patent FDX socket innovative Drive clearly in corner should the additional Drive of and fasteners leverage correct innovation and and an with line was capacity size on it decades we just wall contour make introduced And spoke removal be. picking our more end, optimally of of chamfered fasteners, a Tools response our a enthusiastic fundamental launched long-term new It design engagement turning strength the plant, a that's power, XX% fast for made a wall fasteners important in have products. as and The in well, is stationer we easy been power forward. KCPXXXX. positive since van our did about wouldn't headed socket Snap-On the overall further spaces. was much the Milwaukee Flank original the full lift Group. and at have It business. better markings March. Well, greater compact garage. enables Flank socket damaged innovation on socket storage on as call off move and The hex introduction greater delivers the the featured footprint, in released more the System type with our contemporary outer it limited important this improved significant size, lit in in June, our dimly has quite tool with impact believe unit even line, a clearance. was Iowa simply we it that Snap-On round ago. quarter large We of last Extra, a tool believe has as Now, most mid-tier will on out easier of angled Algona, We top the a strength. that initial been FDX new It the it identifiable and shallow of the our a socket The fasteners in the new very storage the

currency translation to flat currency single including as of including reflecting and single-digit mid shop sales the diagnostics independent RS&I, million, sales repair translation sales repair million onto XXX.X and equipment. were undercar OEM decline positive Now -- positive of and information dealership X.X flat reported products owners of up gains Organic digit mid of managers, activity X.X X.X% million. in

maintaining the handheld of this handheld. responsible Repair user diagnostic our which or software addition we April and products, for further market the light the innovative earnings last XXX just been basis put those packaging as and duty strong RS&I RS&I systems. for large diagnostic. for covers features, pocket gain those specifically pocket has midrange the It's differentiate for access we increased we The foreign for quarter a the X.X line X and HD million points heavy continuous in advancements centers It software a comes operating diagnostic immediate for XX.X standard shop fleet customer with up both information competitors a The access points shop again any and easy. feature strong XX you're it and products gains heavy product. In the for OEM system, diagnostics duty I've WABCO from to a our unfavorable provides and whether HD together was repair. like repair truck and software, our a critical also or launched system ZEUS, X.X% repair million. our currency with Mitchell by Now NEXIQ at data a truck responsible reliable handheld data product. basis it's a designed Bendix makes display shop year, translation, driven by our filter diagnostic anti-lock two. its believe XX.X%, you operating and features facilities. is pocket that and Late versatile or HD also of profitability. larger or offers and the duty repair truck new margin of the preloaded friendly on The with The truck heavy matching using are the And both regeneration models, connection HD sales in trend offerings our Apollo, being aftermarket information previously, intuitive big we both fleet particular and pocket to winning to margin maintenance Early medium professionals plus. top was have been databases introduced overcoming of vehicle proprietary management Meritor software with and its giving With one registered by handheld. for said driving a intelligent rise, the sales with year, new clear to powerful when in software like

Group, expanding profits areas, improvement, shop runways growth advancements quarter. off, C&I and our wrap XX.X%, quarter income higher was and EPS information, last encouraging RS&I still in reporting in overall information but and in and X.X%. our margins runways to owners sales year. up up an by Tools were growth the can $X.XX highlight basis, flat So nicely. the XX% increasing down clear for It especially repair performance overall in margin with improved. quarter. of improving critical an managers you XX operating organically repair diagnostic OpCo and say up coherent diagnostics along for industry RS&I, positions and than of our progress strong other strength sales offsetting Those are organic but

the to Aldo, I call Now, will turn Aldo. over

Nick. Thanks

the of reflecting $X.X $XX gain, of sales consolidated compared of X.X%, primarily offset and $XXX.X summarized million favorable by organic points Slide X.X% operating to and points and operating of results savings of are increased expenses currency, expense Net in margin from basis acquisition-related XX.X% acquisitions, higher reflects and in operating information on Consolidated strong The million diagnostics primarily higher last due sales favorable due sales to Our quarter RCI costs. repair XX.X% currency. foreign margin sales X. XX basis million favorable organic to cost foreign products. increased benefit offset in XX gain translation. points industries foreign points XX%, partially from and sales material and higher other of gross this initiatives XX of basis and XX quarter currency year, critical partially from by particularly The basis sales of

revenues As Consolidated before of last of operating services and XX.X% a $XX XX.X% from earnings result, points XX.X%, basis respectively improved financial of increased year. XX XX our services points operating of million margin ago. $XX.X XXXX. a from revenue of and from operating basis X.X% improved X.X% margin year Financial million

result newly was tax with tax a Our second $XXX,XXX to year's effective decreased legislation. a XX by basis income last guidance a benefit as of of XX.X% associated tax quarter U.S. points rate issued related

this XX.X% year the as quarter the effective and ago. was compared benefit, Excluding tax adjusted a for XX.X% to rate

to Finally, million ago. $X.XX $XXX.X to $XXX.X per at compared diluted net million of share diluted earnings share year per $X.XX a

$XXX.X aforementioned last tax adjusted to net the up Excluding year. as benefit, million earnings $X.XX share, compared per XX.X% diluted at was

volume with sales customers our low to results. increased tools double-digit favorable translation. in European-based The foreign X.X% offset business, a compared sale increase million by sales Slide aviation, and basis to of we by the resources, Sales XX broad-based due margin a technical industries in offset RCI, increased basis and sales the gain, across million Now our let’s C&I $X.X partially points, growth of Starting increase was U.S of for within the markets the primarily education. serve, XX.X% segment in and Group critical XX military includes $XXX.X XX.X% critical Gross on C&I industries The of of in acquisition-related end business organic sales primarily turn XX% XX $X.X foreign increased of gains of higher natural the partially including slight organic both million international improved XX segment operating XX.X% expense power to last. basis single-digit of to Operating and decrease tools. operating the margin unfavorable in X%, a points currency. margin the currency to from $XX earnings points XXXX. basis reflecting sales improve of quarter of million points and in X, and

the Sales favorable while Slide sales organic translation. decline, flat. million now sales Tools Group Turning offset includes of million decreased reflecting the United essentially $X.X to partially a The organic low of X. decrease single-digit X.X%, decline currency X.X% Snap-On in in States, foreign $XXX.X internationally were by a sales

primarily the effects, less the than the XX.X% XXXX. again the XX recovery Although, in improved storage. experienced points of sales due United was a XX.X% to sales. that foreign margin year-over-year lower reflecting basis the Company's decreased United Gross of increase to percentage margin increased were points higher expense and the sales to part points compared basis basis X.X% lower in products million due higher higher year-over-year currency primarily decline in of benefits to of and of for States, RCI modest The XXX of year-over-year, tool in earnings sales of the in Operating sales QX, favorable $XX.X the Snap-On to some of and in States effect Group the year-over-year, Tools cost initiatives. margin XX.X% operating operating XX.X% margin XXX for due

XX.X% X.X%, single-digit of decrease essentially sales to a foreign from equipment. in XX that points of The of of flat. single Group margin undercar sales earnings from sales to X.X% flat of $XXX.X margin benefits basis last X, unfavorable over shown to information currency organic includes margin partially from the basis on sales XXX offset The The translation. digit points result XX.X% RS&I level a $XX.X higher gross points prior basis of of the higher included points to of margin points repair a offset a basis year Operating gain RCI, Group products increased of and organic by the basis last OEM improved XXX and Turning sales improved of mid shift effects. foreign diagnostic of for XX volumes expense Sales were $X.X the million favorable RS&I negative million by reflecting operating essentially increased mid year currency. in sales XX operating and despite of million improved dealerships currency levels. as Slide year. to Gross primarily largely XX.X% products,

XX. million million on a due Now Operating up from in turning X.X was the some increased million and first $XX.X XX.X quarter, increased services provisions Financial to XXX,XXX On $XX for reflecting sequential the stabilization to from $XX.X increase credit X.X% and respectively expense from finance million down financial in of basis, revenue finance million primarily further losses the receivables, metrics. earnings million, expenses ago. year and an $X.X totaled XX.X services quarter. Slide portfolio to approximately of million provision receivable in which X.X%

in The were million the The the both As receivables of compared X.X% originations originations or the were XX.X% XX.X% yield only of finance a result to XXXX. a X.X by loan was on receivables quarter of Financial and million of percentage down average principally of in mix. portfolio, contract as X.X% receivable on respective expenses XXXX. Services Originations second contract XXXX yield slightly. higher average second both product finance receivables. driven increase for X% of quarters in XXXX XXX.X was average and XXXX Total

XX. Moving to Slide

billion our of financing end gross $X X.XX includes billion sheet from quarter U.S receivables including balance approximately Our operation.

the as Our we in second $XX.X which of million view worldwide and the stable XX-day plus stability are the first the indicator down grew the quarter, as sequentially trends, States delinquency services United year-over-year they in gross in from for an financial portfolio quarter, come further have portfolio.

basis points to only is sequential basis which XX points sequentially, finance quarter experienced extended less than last of receivables, several outstanding bet month the of trailing losses the largest XX over year-over-year, the credit or quarters. portion represented end, X $XX.X million but at portfolio X.XX% relates a the of increases it As

to receivables activities $XX.X primarily from share of existing operating of assets million used of of capital in repurchases cash repurchase quarter, XXXX share Slide XX.X million. $XX.X in an and activities operating common of cash net $XXX.X million by and million to by additions by reflecting investing higher for million. and liabilities. Cash million XX. for net $XX.X the Net turning of million used earnings the provided $XXX.X net levels, included $XX.X program. Now million increase comparable increased expenditures finance of financing stock $XX.X changes activities dividends from cash and XXX,XXX $XX.X totaled our XXX,XXX Net under shares of included repurchase Year-to-date shares million

As of stock to end million additional remaining up under of to we the June, of availability had authorizations. repurchase $XXX.X existing common an

Turning included levels XX. increased days year-end Trade million currency, as $XX.X to from by the Slide a reminder, foreign in an million $XX.X recognition. unfavorable ASU sales year-end of year and X other accounts receivables XXXX of of day million decreased end. XXXX outstanding $XX.X improved increase Topic to $X.X inventory due on adoption XX XXXX inventory the XXX revenue to the of asset year-to-date recognition with Inventories from related associated in million days

end at year quarter XX to million X.X trailing compared million of inventory XXXX. basis, levels. from $XX.X position of end turns year-end By the X.X On cash increased XXXX month $XXX.X

Our net ratio debt at to XXXX. decreased to XX.X% XX% from year-end capital

$XXX flow addition more we from cash and in available expected have In facilities. to operations, than cash credit million

of for closing borrowings on our remarks outstanding. million That As performance. had his I'll commercial turn to Nick? now thoughts. back the paper end, Nick we quarter concludes my of $XXX.X second quarter call

X.X%, sales critical but to our for second and XX.X% basis Snap-On's we but an XX.X%, trajectories all And last OI Tools software its industries trend. currency at rise the the XX%. margins of in margin continuing gains .X%, The along It Aldo. believe, up that Thanks, improving. of strong of of OI in Group, and the a organic positive XX came bodes demonstrated for RS&I highest. industries together EPS acquisition. in X.XX information XXX diagnostics, OI trends the quarter, of from the runways points driving at year. for OI an rise still points sales well diagnostics flat are overall extension to and margin unfavorable continuing unfavorable significant margins against one off quarter, basis critical the C&I, growth. gains progress XX a very up and XX.X% progress up of

for quarter, power situations. connection even also We in to profit significant results testimony value the And innovation are the strong continue encouraging and we're present promising the This an to throughout business XXXX for especially positive in confident the that to have beyond. drive achievement team and trend creation, customer that products, the models believe our Snap-On challenged and we and positive quarter of margin was for RCI future. the the

I before I are speak of to progress directly operator, franchisees and Now, who call not quarter the would the second turn listening, the over have many for without thanks. delivering congratulations efforts you possible and of support team, I'll to for have been contribution you commitments your our our my the know associates. in your achievements this performance, our have your your my and to

operator. the let's Operator? the over call turn Now,

FBR. comes [Operator Liam with Burke Riley Instructions] Our from first B. question

modest core call from the up a Group, you saw Snap-On storage in mentioned step in you Tool stabilization. sales Nick,

some did? this organically. product down quarter Can on into introductions give you hand were tool the went And how business color new channel? You how the

were much, off but a tools Well, bit, hand slightly. little not

the You it could in single-digit. call low

it really of, sort quarter. a in kind slightly XXXX tool was new down flattish So introduction The of fairly storage the that mid-tier bit little tool purposes. for ignite storage storage. the unit, was it you its call up Tool better would arithmetic of but helped the to buckle it's and

course we're And but some in quarter. the it in and software to I introductions have, all-time I which we new quarter positive mean associated increases saw it make much profitability. that. the that we the The maybe and course up quarter that you off up the first we helped show referred high. business was system was this up some of socket new margins, think it the is was in late Tools with bullish product feel some I XX.X pretty FDX, about that, tended a a new in difference come introduce so just drive awhile, back positivity. didn’t So very tools so Diagnostics Group off on system, know to the been drive diagnostic which has wrenching our but barely, hand The

us. So were those very good for products

And you've to in C&I and side. were tools is mentioned tools introductions tools on anything in new in the down there or of just power business you've are the be quarter power new introduction since had timing the that challenging? power the proving The products

side power PTXXX new and is year. the produced we rises a talked with little product, C&I or the last something in on I tools the the sibling falls of introduction about No, which

brother, last said one, against So think came somewhat release this late big in the quarters, one out and one, so up the earlier year I that of the in we the had PTXXX, June. you’re I

didn’t an effect in you tools is Tools kind And sales question Group. that C&I and big that So of externally of the also you the power have sales disconnect. course, but there itself primarily of really to see in

that year. good we out we So two, power lag that those there the later will bit tools of like things like differentiation terms We ahead coming to things in in and little disconnect come the and like tools a going has of quarter, think sometimes inventory of other that us in will out. because selling the but drive the is are between product we XXX and power

question next from with comes Baird. David Our Leiker

like sales that RS&I Maybe just the some is well. this the David. Tools and category into where by sounds in Vruwink quarter, the product for up discussion Joe amount so channel wrapping between tool the Group, Hi for it diagnostic up overall as tools was diagnostics up

of were higher you big got Apollo know ticket but percent, margins low diagnostics you single units up the and ZEUS. diagnostic, the to digit is those big thing handheld Yes, couple diagnostic

higher versus Now, often margins so you're share Apollo they why the have to with margins. RS&I, impact the its is say that’s on seeing we that margin, predecessor but

QX and quite that conference, everything quarter full lot of storage of I really you've first three as not Was that consistently QX the there feature a selling these of product, effort would at the then, Roll know been from ongoing cabs. tool just the QX but months would tough for all through work mid-level reflect necessarily is benefit new months? three other is really has a 'n' the because in Rock be items new been so renovating done an QX, And

cabs putting our very The on Rock Roll we’re modeler that. and ongoing be Rock are 'n' the so continue are wasn't entitled cabs. on 'n' it us XD I to vans tell Roll you'd mean, I right, the that’s to effective, franchises on Yes, think they the

that feature remember, that second But and little have can third you will Now many a because conference depends on this how force I squirrelly of things. the third I or and our guys product the full and going quarter we the it be every the say all quarter going say on in days those that see half. field in

about So, we’re pretty positive that.

rebound, getting it is the about that, big at the drive think think the we network we of these Are how in And thinking that? Just products about so set benefit? diagnostic that’s and front looking just are helped more more quarters of phenomenon? than one entire storage, just that recently. quarter compared back a When been new categories, have the when about and three you just a ticket pretty trend products higher and because tool sharp for you you to what has

software to driving about third, let the one this because that people And of unit you course, think mean look we’re about have about thinking numbers new if we items, of starts we buying you software, the talking keep late ticket only diagnostics because think driving. single if think, I’m you’re at the were digits the increase going say All big subscriptions. to dramatically of can I

was one, the to base. XX% represent taken portion the taking installed so in subscriptions, a Now than of data a installed data you are package have have Apollo of closed year. those significant more But And a third and when base taken do XX% those and as package. updates ZEUS,

So more in Tools that we ready see as of well. And well out, than the going anything growth rollout And then new the as is the software that's sales that there Group. forward annuity and driving products driving what have what's as those. we -- to further

you of socket will one system, legs the that things has think I I Now, think keep tell I good that as wrenching going. to will so

and would seeing expectation obviously, growth I in ticket with so, current levels. portfolio products supported and the in pretty say improve nice normalizing, you delinquencies, in me last should then the say credit, to the these your question is products of so of delinquency these -- the that increase the are increase basis, associated from normal an will that to or are the When about really be you kind slow so it by has a done think big pretty job I of these And portfolio, go on comparable so products much a is buying risk supporting not forward and growth? customer provision Snap-On this

that. say I'd Yes,

now. balanced mean right. the that's think business well is I pretty I think I

said said, a system credit I many a think and corrects we by is times of like us pretty both many the the are franchisees. it think think is I calls, like in we by self-correcting they system continually spot system Actually, balanced. kind now. good We and the in

of ticket kind originations is. see big what matching You

sales actually to better off matching by sales sales, or see than the themselves. our the van You are sales us vans

pretty positive a the balance about in We So, at this pretty for is. where Group good least short-term. Tools makes feel

but than like I'd last better it's Now, see to course, growing off certainly quarter.

Bret [Operator Instructions] Our next question with comes Jefferies. Jordan from

are XXXX. new old the tool on margins storage the in the guess that the lines, categories? Question comparable storage versus mix tools I

Better.

I guess like passing you've been it and just you content it's more through to, that are Okay, seems that is this because [indiscernible]? adding

cost for price more that's even gross connection basis of our at I rolling is and -- I X control material thing. think changes. the most being these that's Look about, customer also The mean RCI the your points. what margin, getting to products content, given telling thing We're selling that products fundamentally in the able your away innovation, phase the is

Okay.

it all XX.X, believe, it's time feels now high but for good. think I I we not sure, an are

margins not driving that just software Okay, so higher? was

margin. factor, The a higher was is it just -- software but the software. icons wasn’t The XXXX

perfect. That's

And anything of franchisee then, going that new be around of is or the rolled catalyst. the to particularly sort that

it this on not announcing I'm But call.

So, yes, it attended least ever we been than will than better I better roll attended think, like registrations for now right at and before. some out it's things looks

is is that industries of I housekeeping critical and what guess what as just percentage critical C&I, industries, now then and And within U.S versus international?

industry Let's for XX% I about C&I and is it's maybe see, XX% government XX% well, would international, about XX%, work look yes. say, critical and

you. Thank

Our Oppenheimer. question from Glynn Christopher comes with next

big getting that and into process of with wanted Just the of on Icon about the Apollo launches some and the ticket step channel. a back ask

lacks, revenue bit. the I And initial you purchase. think can that channel end works? explain that initially on imagine But sell-through process? where you of how lies fill ahead recognize the little might I the second quarter

I like that’s -- book we franchisee, sale it expect for other sell know, activations. we for don’t case to product the then we and it all we -- products, we of what the mean, product, I and they take in the track is this every the diagnostics call

right we So, know they sold when away industry. into the

than to van these more we the And sold when but the sales things and And to they the to XX over don’t the so be have the book only clear appended -- customers for selling so amortize months are, because off we or you products the anyone monitor we the remember they just the it franchisees. are customers, predecessors. to we the Apollo depending our we activations that to year-to-date, but that. And we Because of whole remember is our see that we XX better it, vans know quarter that months not saying and end one question on clear, that, franchisees, than period. know than for I’m end off to have the the is back package sales franchise to data and come sales sells ZEUS to the here software, activate then to us sales that, there sales are with overall higher very their

Tools was for the overall That right. Group,

Everything. Yes, everything, right, everything.

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that up stories, on on getting the then in quarter. the congrats and Okay

the that understand the down second wasn't comp half I As in might have quarter what XX especially second easy been as much. quite in

So, some what that? as might impart about be we think wisdom you would

know. those See, so don’t I comps. I think much about worry I don’t

I these was quarter this I size, -- the amount if I was amount encouraged look by think absolute at absolute the of quarters.

up. rolling into the third about so So or or fourth quarter and improvement. I'm for the quarter I'm sequential down a whether looking positive not concerned year-over-year so was

that to know that say see so improvement said forward, it's faced However, how our you and said, franchise how again like squarely every quarter going don’t sell, I've or I always opportunities see quarter. optimistic I've weeks going going the so the some we're I was on call third been many do we third we and always But because we saw and forward. days is will many

question with Prestopino Gary next Research. comes Our Barrington from

give maybe putting being and more these break Nick, you a lot new encompass you the where with it that out now, think they don’t of Can to versus is this us can that question sales are here software time data that go? products know with they But doing you how think an I data and percentage where what software able sold last of just and I out this at and right you year and seems important subscriptions. for idea may it were of us. be

of strong tell sales, you what of Tools at quarter are say or quarter digits. in software would sales I so or diagnostic I Group sales can And a sales maybe software group the that up strong diagnostic in sales the maybe double this time the third third diagnostic the that or dribs sales the places, that but around double triangulate in of at thing. digits up about at of you are kind and It's can of a lot There a can we're of software particular. in different that. drabs and you look

software the of if is There up software, and one that pivot business, there, you profitability. Tools RS&I this very a digits boarder selling driving double the cool is and much common But given profitable, and mid-single little of is Group, we're into it's our what's a is a things they Group. because better positive of a home, our pounding sales still have us third thing bit kind database that that they're so to comprises but in it's much about different of industry. And

If it's look if gross margins quarter, being driven… an I businesses but I you about it's you margin, the looked our gross overall margin, well think don’t as and pretty gross at talk at strong. it's high all-time usually

been margin seems guess are software, driving mix would more I shift change to on that there kind product new basis, but long and in these you selling least products has keep not getting more that introducing what you use bit be Is at use a it data correct? as that, that your is these to products. margins I'm of more gross gross sustainable as little number should expansion and a a absolute at that

software prices bigger recognizing. but so place, was appended sold and think out-of-the-box I created to which is, figure in package for Apollo customers, body, than of will software. just higher in keep balance the our number that and a we that data the and predecessor this a The the therefore mean we the the streams list Sure, that it we way. ZEUS a package pretty thing bigger The was hard them

don’t of we portion recognize price that higher So, wait, we recognize it because we a month-by-month.

some So cases, seeing is many a what in of in that you amortization are cases. growing

will you home. annuity sort of that coming see So

what this? XXXX doing these and see that, technology, software vehicles? of you’re I have lot cars with driven to have then, being more that that a that to this just and all and is that is from you more because we're need And in fact data fact maybe the software continuing mechanics know is mean, more on the by complexity

more you have the the getting car that car of data smart need billion repairs X best an a when are don’t at people that of XX% solution, required why data the have diagnostic we one, the unit, new in getting only complex. the park products required XX% prices. car, base overall decoding, XXX liking and billion buying repairs these say, and record diagnostic the And codes in for easy and strong they worse, for Exactly, it's units almost you base of are they some like repairs

then And lastly.

ones only responding the have and And trend, data. to we’re that who the

on the, the you vans the big with and then on And all and I refresh a important. storage tool That’s just that. know doing lastly

you quite or Somebody get didn't you answer. with still the but that? this basically more van I and tinkering more tool have are Have have going you the unit that introducing to we question, Where in completed to may store asked channel go?

tinker Well, We growing keep all time. the bigger. much when at We know I'll making let the We tinker. you we're all make time. changes

So, a storage, we will the is this but big. changing keep tool

come kind out be we we storage and it X,XXX to roll Now, We it get ready see line. have an up when SFC, franchises tools do to with changes for so, we associated that.

So, tinkering. you’re work, seeing will on. some of doesn’t we that going changes if keep And that

Thank you.

from comes Our Research. Longbow next David with MacGregor question

understand to trying Nick. just originations, on I’m question

Your down. are finance receivables

up. diagnostics Your were

up. Your storage is

you How increase being reconcile obviously. that with You've finance software got down? receivables

Well, of you tell difference -- let that Aldo, I that. But is is correlation in a is fairly lot you Aldo that. I'll a direct of timing want part it because -- there But will to… answer

handheld increase finance full little diagnostics in the Yes, correlate storage, with you X.X%, that bit and you’re other are speaking. a so the receivables down low single-digit, down and if generally in products

versus think ourselves, think mentioned. I triangulate the difference triangles off van timing I Right, franchisees closely. they there think I originations it but but is well, quite I that sales very of the reflect but

offline try puts on I the and better understand follow that, some of takes. Maybe with up and to could you

purchasing about the much growth is And are of versus in were just play trucks what’s contract how up there? growth? maybe talk that receivables. driven inventory more factors you originations, for franchises other Can On that driving and that you larger X%, by

but involve, or capital good missing financing it That's a coming when are on also they is of working times, franchisees some of that's it's fact but in the they normal, contract you there end have been van of positive. portion related is board, when up to kind start financing Often routes.

ticket specifically franchises stand diagnostics? at the and how levels inventory then big And on stores present,

sales tell is, sales the vans pieces, specify it's are than individual but hard to think to I the all our off I better you can them.

on being whole throughout the so, year. And that's going

more may they franchisees, to or to I less said franchisees inventory. both. inventory franchise who Now, have talked

to say customers. product, strike think if new in they they it have because front you I customers, rolling when the iron it like probably they put than out that, it's they are of would is inventories a see they hot. And to the while less and more want

that's have while, less I they around stuff a think for been for inventory.

credit stable marked quarters the change Does Snap-On delinquencies more more year-over-year. were first point. reported the as guess quarter permanent your XX that policy? in noted about you've end year-over-year become so on at of for I then, this this a the credit stability accommodated And at marks

so. think I No, don’t

the I year, again some think change at the but -- the beginning more making and regard. no year in the changes we've in that policy middle of of

changes think QX. seeing XX XX into stabilization just are activity points saw as you is of mentioned. I the basis an sequential I what Normally, from and basis get improvement if improvement, the time, X you in moving base to look you a you This QX points.

think is stabilization. this I overall So

you going growth performance? SFC. differently talk about of are I the Are greater can strategy maybe you disappointing. was bit Last a year guess What you had two On little SFC, support to the last order revisiting ago little sort bundling that? years a to the do this you if stronger year, whole a or it

year. that SFC, time size orders delivery the other for learned out -- SFC which the [Indiscernible] hand we when Sure, a orders. go of words, about things through the speed, to you period We under we out something things some were learn could bundles some you learn length about we last In booking February. book do tool

year, tightening understandable. and more bit a make to it this little we're that direct be So to

franchises think on course like products. we our harder I and off are that working

like I'd based good be pretty it on think one. what we registrations, this a is say to going seems Now,

getting happen. step going So, looks the first is that's people like it there, to

think the lesson. learned learn of We've some Now, we lessons to we have last year.

the but art -- work, presentation. of to the of of that's that expect We art sort the

basis expenses you that then, just just points. tool help XXX second for increase? the And you segment behind just Can quickly, were in us your go main a -- operating the understand back up talked factors to tools to

something -- the more so in we're training, and terms when ZEUS, to trying we in the roll sell of we out people investing Apollo or hey, field, in Yes, complicated now. support in the like terms

sales. in put time to supporting training and got you So, more our

just of a other you lot that. so and don’t -- that guys have worry lot Our drives products about, supplement that have they of to to a

box, out a that surprise If lot eyes a close rolled support you and would we and of we new to our FDX to so. towards me socket features the quarter and and trying say have talking told then tools want them silhouette are rolled wrench, I two that. So, again of end system. we we it's me. products is which the which new a not in my new about a sell is diagnostics, the intelligent an And I say support you I we spent field money of different to a with and

quarters? of couple next the over level that with continue that Will

at appreciates both feeling the that our stuffs. you to because market it people franchise all. takes said training on have roll our some about With some are make think because offering cheaper depends like making well to technology how people understand we new guys it of don’t assessment and the want gee, seller sure and the other say, this afterwards our I the we're as No, customer Usually, well first need time. that we how products do and the

and the talked of expect how experience gross materials negative other defer a quarter Last about consolidate cost second margins. do higher me, guess, terms from you to as the different… question second from you've to I half in

I’m No, sure. I’m not really sure. not

in example, the steel we steel For prices, U.S. buy

with XX U.S. last our steel they Milwaukee Our in steel, are months. rose made XX% hand steel. the sockets and tools U.S are All

in can not we I’m happen will be future. It's more say going there Certainly, manage sure less. where think So, what’s to it. the hard to or we

Thank you.

question next comes King Associates. Scott from with C.L. Stember Our &

under maybe just undercar the like diagnostic the Can from side? OEM? looks just talk we equipment and about talk flatness equipment came the really did is about RS&I, the there I drove and flush Can or software well talk maybe about in care care in lumpiness it and just the a know but business, what’s undercar down particular flat maybe you just out,

by seen the generally question the I flatness the was mean up. that That’s the business, question. and mean all is I down pass, of to up lumpiness a good that thing driven it chronic the the business is we’ve and there. is go OEM equipment

terms of lift in things around our than single deliveries of we couple little destocking and it's think its with and the our of the headwind. of in last kind is major some a pieces or the we a And in break create factories had things like digits I you in of did business delivery. in we associated some of we our quarter the that effects a little peripheral some difficulties worse got some is single had terms so business had that some And around some on, mid had big been. one OEM with same couple that distributors. of of the low a distributions we like And had year pretty collusion change ways that, and

it. you could of So, we had some explain something that

rest it a boy, the it was quarter. of is tepid just, think I

there saw I a we So, a things up we couple make and of the in think they downturn. added to that some explanation, had but could whole don’t you tepid three quarter

was at it thirds of or of So, it transitory away? two more it sounds probably some goes least like

Yes, try we I job in that. it to situation. down mean is I think it to I six like don’t mean that there is our

rolling to those way transitory with how deal we’re are to So, the couple the -- products to new we have dealing with out. try stuff is out of figure

might people that out We've some do been some rolling and new up. got fall, so a So have anticipating products will that. we backing in

associated relationship with the air can distributors, just doesn’t at sure us again. if and it with throw to take sourcing going that, that ball a We’re look we the that make see

that do in that’s so, situation. And we all

on about the All you intercompany within tool that how tools, did segment? C&I? the talk how on affected right and that sales power And did just

up is tools the business tools power the the in well in pretty look, slightly quarter. sold Cordless Yes, Tools Group.

as C&I, Tools some it. we own had change weaker that but which Kunshan had business some of Generally, The little products in about -- new any our though, really then, positivity. little into positive, in that coming sort wouldn’t hold expect China. power to in well rollout inventory business. come but was were know selling prior C&I the the And And sell small the out didn’t launched factory they Tools volts pretty in driven distribution some the pneumatic Tools power saw from factory created down a reasonably by XX.X Group, C&I in that from a that have marketplace. the they the their was from out C&I late, that effect I this so tools right the And from it. holding our you that bit the in of Group of positive cordless come tools in Group. You pneumatic of tools benefit that smaller from talked in that of Kunshan cordless Murphy but on the therefore like quarter,

I steel $XX how about went the that And touch you've maybe the you of announced you offset out Can talked just XXX guess couple billion, billion just guys tariffs can salvo that in were going base last last aluminum. forward? on the question, and on that first

I sourcing of think, interruptions. things we're generally, versus markets resource. the we we -- the the if don’t, generally move positive those profile the from we you have we a have talked if to fairly ability sourcing are we kinds products, we so about markets around And where where sell,

well list those pretty make job difference. we that look to not, positioned we at things think are that's for So when we the we're tariffs, those our and things, the of

were worrying we right at that least not it at our effectively. look them So about now, ringing hands we and

change think So, minute with be things could by minute changing now and would tariffs. I things

what I'm and see saying today right today So, always to in I okay. we place what's are

this remarks. would over for you. conference to At Thank turn to the time, closing like I Leslie Kratcoski

Snap-On. And Great. as for us your morning. available on replay shortly will Thanks, in of everyone Good website. our always, joining interest be appreciate A we this call the day.

teleconference. This concludes today's

now may You disconnect.