Snap-On Inc Q3 2024 Earnings Call Summary

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

Question: Christopher Glynn - Oppenheimer & Co. Inc. - Analyst : Good morning, Nick. I wanted to dive into the kind of seasonal strength at SOT. Does that feel like kind of reset baseline for normal seasonal kind of pattern from here? We usually have a fourth quarter lift or maybe that gets into what the sell-in, sell-through was in the third quarter, too, and if that needs to be tested on the sell-through in the current quarter.

Question: Christopher Glynn - Oppenheimer & Co. Inc. - Analyst : Sounds great. And then just switching on RS&I. It's been very sturdy run rate, third quarter, a bit of a step down, historically not much routine seasonality, but 3Q last year also kind of deviated a little lower versus the way the business had been trending. So curious if you can offer any insights around that. Maybe does it feel like the equipment side is entering an interim pause after some steady customers recapitalizing. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Hey, good morning, all. In your narrative, you did kind give us a peak here as to what this pivot in the Tools Group, how it impacted the quarter and on a quarterly basis, sequentially, you were up $18 million. Is -- could you maybe just help us here? Was the majority of that sequential increase due to the pivot in sales?

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Is it safe to say that a lot of this was due to new products coming into the market that you've introduced? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : That's -- I buy a whole Snap-on toolbox of tools just to do that. The last question is it seems like you've kind of talked about your torque products in C&I over the last couple of quarters. Now has that -- is something changing in the market that is moving more towards specialty torque. I know your developed products, and obviously, you've made some acquisitions in that area. But could you just help us out on what kind of secular tailwinds there are that's driving for.

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Yeah.

Question: David MacGregor - Longbow Research - Analyst : Hey, good morning. I wonder if you could just -- a couple of just questions for the model. SFC order growth, I mean, you indicated last year in the third quarter, you saw a mid-single-digit growth. Can you just give us some sense of what that order growth or decline might have looked like this year? And just also with respect to -- so it was flat year over year or it was up mid-single to last year?

Question: David MacGregor - Longbow Research - Analyst : When you think about the fulfillment on those orders from SFC this year and sort of the cadence of the timing of those orders, will there be anything different in terms of the pattern as they fall across 3Q and 4Q than last year, maybe.

Question: David MacGregor - Longbow Research - Analyst : So I just want to clarify, you got about the same number of orders as you did last year, but you shipped a little more in 3Q versus 4Q this year than you would have last year is what you're saying?

Question: David MacGregor - Longbow Research - Analyst : Okay. And then a question for Aldo, on the Snap-on Tools gross profits up 100 basis points. You called out in your slide deck, price cost of raw materials and RCI, you didn't mention the category mix with the stronger hand tools versus say, diagnostics. Is that just an oversight? Or is there something that we should read into the way you --? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: David MacGregor - Longbow Research - Analyst : Okay. It sounds like maybe that category mix is not quite as big a contributor this quarter as it has been in previous quarters, your assessment?

Question: David MacGregor - Longbow Research - Analyst : Next question for me just on fourth quarter, the Snap-on Tools segment again, you've got an easier compare on a year-over-year basis. You talked about the third quarter truck restock going on. I guess, how are you thinking about the growth puts and takes for 4Q in Snap-on tools?

Question: David MacGregor - Longbow Research - Analyst : Right. Okay. Last question for me. I wonder if you could just update us on franchisee attrition trends and -- can you just talk about what the typical experience is with growth performance when that route comes back to (multiple speakers) --? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: David MacGregor - Longbow Research - Analyst : Right. And the repurchase of inventory from exiting franchisees, did that impact the growth number this quarter?

Question: Luke Junk - Robert W. Baird & Co. Incorporated - Analyst : Good morning, Nick. Thanks for taking question. I'll catch up with you too. First one for me is on the Tools Group, 3Q up versus 2Q, a great outcome. Obviously, most years, it's the opposite, as you noted. I want to focus on the execution side, clearly, the focus on quicker payback items is the same, but just the enabling activities, what do you think were the bigger contributors. Is it the capacity expansions helping incrementally in Milwaukee, especially, can you tie it back to getting the mix of promotions, right? Is there something we should be looking at the tool carts? Is it all the above, Nick, one thing you spike out.

Question: Luke Junk - Robert W. Baird & Co. Incorporated - Analyst : Got it. And then second, if you could just double click on what you're seeing within diagnostics. Specifically, you can see the number, obviously, in RS&I, but I'm wondering about Tools Group as well. RS&I flip from down mid-single digit last quarter to now up low single digit. Apollo pluses out there right now is a newer product. Is that what we're seeing in the RS&I number incrementally does Tools Group benefit from that as well, Nick.

Question: Brett Jordan - Jefferies - Analyst : Hey, good morning, guys. In the Tools Group, I mean, you talked about improving momentum, is that mix in the sense that the low value or the quick payback product is gaining share? Are you seeing sort of a sentiment change at the shop level. So it still seems like traffic is pretty sluggish from talking to parts distributors and the collision industry still down. Is it mix? Or is the mechanic sentiment improving?

Question: Brett Jordan - Jefferies - Analyst : Yes. The guys who sell parts to the garage I say it's pretty sluggish. I guess, although on the corporate expense modeling, I mean, could you help us a little bit with '25 just given the variation in that. Is there running Q3 to Q4 sort of flat, is that a rate we should continue into next year? Aldo Pagliari - Snap-On Inc - Chief Financial Officer, Senior Vice President - Finance I'd say a little bit of hope here in my voice is that, but one of the reasons that we're lower this year is lower performance-based compensation expense. So as we reset our plan objectives for 2025, you usually start the year assuming you're going to hit a target. So that means if that were the case, I'd more model 27-ish per quarter, something in that range. That's how I would think about that, Brett. But this year, we're not growing as fast as we had expected coming into the year, and therefore, that's one of the key reasons why there's a performance-based compensation differences.

Question: Carolina Jolly - Gabelli Funds - Analyst : Thank you for taking my question. So it sounds like within RS&I, software and Diagnostics, the higher-margin business is doing well. But can you remind me what's kind of happening in terms of the hardware in that business.

Question: Carolina Jolly - Gabelli Funds - Analyst : What's kind of happening in the hardware part of the business, the areas that might be a little more sluggish?