Snap-On Inc Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Luke Junk - Robert W. Baird & Co., Inc. - Analyst : To start with, just hoping we could get an update on the facility expansion projects that you have going on right now, both kind of progress incrementally timing and then how things are progressing versus your expectations? And to what extent you can leverage that to pivot the mix and really focus on those quicker payback items that folks are looking for?

Question: Luke Junk - Robert W. Baird & Co., Inc. - Analyst : Facility expansions, I think Milwaukee Yes.

Question: Luke Junk - Robert W. Baird & Co., Inc. - Analyst : That's very helpful. Could you maybe comment on tool storage, specifically in the quarter [because] the benefit, I think, already in the first quarter of you having the capacity in place and flexing it like you just spoke to, did the growth continue in the second quarter?

Question: Luke Junk - Robert W. Baird & Co., Inc. - Analyst : And then lastly, just given the uncertainty in terms of tax right now, do you meter or change your approach to the SFC all this year just in terms of promotions and positioning and could it be maybe a venue to refine your approach in this more unsettled environment kind of exiting this year into '25 ink?

Question: Patrick Buckley - Jefferies LLC - Analyst : This is Patrick Buckley, on for Brett. On the RS&I, could you talk a bit more on the dispersion between the OEM dealer customers and the independents. Is that independent shop softness similar to what you're seeing in the Tools Group? Just more cautious given the backdrop? Or is there something else there?

Question: Patrick Buckley - Jefferies LLC - Analyst : Got it. That's helpful. And then within the Tools Group, could you talk about how pricing compared to units during the quarter? Or maybe just additional color around how successful these lower payback items are and improving volumes and how that mix is affecting things? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

Question: Gary Prestopino - Barrington Research Associates - Analyst : Just wanted to address the corporate expenses look like they were down, and I would assume that's the impact of the legal settlement, right?

Question: Gary Prestopino - Barrington Research Associates - Analyst : Right. And I could also see the stock comp was down. And I guess what I'm getting at is that looking forward in the back half of the year, should it be some -- without the impact of any legal settlement? Should it be somewhere between $20 million and $25 million a quarter?

Question: Gary Prestopino - Barrington Research Associates - Analyst : The other question I want to ask you is quite obvious that there's a slowdown here in the buying of diagnostic equipment. Some of it deals with the fact that you just had a great year last year. But when does it get to the point where the technician or the shop starts falling behind, if ever, if that occurs really with not upgrading their diagnostic product. And my understanding is that with these products, it really speeds up your production being able to repair cars. So does that start coming into play here as we work deeper into this without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

Question: David MacGregor - Longbow Research - Analyst : Nick, let me just ask you about sort of the second half and expectations here. I mean given second quarter negative organic growth in Snap-On tools. Does that suggest second half growth should be negative as well. And I mean, 2Q was not a challenging compare. And so I guess I'm just wondering how much forward visibility you have given the truck inventory levels and pre-SFC order growth?

Question: David MacGregor - Longbow Research - Analyst : Right. Nick, the operating expenses in the second quarter in the Snap-On Tools segment deleveraged. You characterized that mostly as volume-related I guess it sounds now like you're about to lean more heavily into training and maybe advertising and promotions. And I'm just wondering how you expect that OpEx to continue deleveraging, in the second half?

Question: David MacGregor - Longbow Research - Analyst : So we continue doing that in the second half?

Question: David MacGregor - Longbow Research - Analyst : Got it. And then can you just talk about cadence within the quarter? You mentioned a moment ago in responding to the question that your trucks were destocking right up until late in the quarter.

Question: David MacGregor - Longbow Research - Analyst : I was just going to get you to talk about cadence. Please go ahead.

Question: David MacGregor - Longbow Research - Analyst : And your early July experience wouldn't give you a framework for interpreter?

Question: David MacGregor - Longbow Research - Analyst : Last question for me. Last question for me, if I could. Just on credit. I mean what are you seeing increase in RA transfers? And what would originations look like without the RA transfers and Credit penetration (inaudible). Aldo Pagliari - Snap-On Inc - Senior Vice President - Finance, Chief Financial Officer The mix of activities is pretty much similar to last quarter. So no, they have not pivoted to RA transfers as a method of funding activity on demand or anything like that.

Question: Scott Stember - ROTH MKM - Analyst : Nick, is there a way of, trying to see how much of the tool sales decline is really just based on the fact that you still don't have the available capacity to make product? Just trying to frame that out -- and If you can't do that, maybe just give us an idea of when would you expect to have all of the capacity and all the bottlenecks could up to make sure that you're at least making what they need? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

Question: Scott Stember - ROTH MKM - Analyst : And then just last question. When you're talking with the shops and just with your franchisees, what are you hearing about how your competitors are faring at least at the shop level -- just trying to sense if there's a share loss or --

Question: Christopher Glynn - Oppenheimer - Analyst : Was just first curious about net cash position now, the remaining repurchase authorization is a small proportion of your liquidity. So your kind of balance sheet positions in a different spot than I've seen in past years. I'm wondering how you think about that.

Question: Christopher Glynn - Oppenheimer - Analyst : Okay. And my follow-up, just back to SOT curious if there's any interesting geographic dispersion. We've got an entry here, lots of regions, different economies to a degree on the incremental weakening, you seen any kind of dispersion in regions?

Question: Christopher Glynn - Oppenheimer - Analyst : Do you think tax did get hit with more regulatory and compliance costs?

Question: Christopher Glynn - Oppenheimer - Analyst : Thanks, Nick.

Question: Thomas Hayes - CL King & Associates - Analyst : Appreciate you fitting in. Just quickly, Nick, maybe any color you could provide on what you're seeing on the positive side on the critical industries. I think you guys called it out as a a bit of a bright spot. Is there anything maybe on avionics or military or natural resources that stands out?