Hello, and welcome to the Snap-on Incorporated Third Quarter 2022 Results Conference Call. My name is Caroline, and I will be your coordinator for today's event. Please note that this call is being recorded. During the call, your lines will be on listen-only mode. However, there will be an opportunity to ask questions at the end. I will now hand over the call to your host, Sara Verbsky, to begin the conference. Thank you.

Thank you, Caroline, and good morning, everyone. Thank you for joining us today to review Snap-on's third quarter results, which are detailed in our press release issued earlier this morning. We have on the call today, Nick Pinchuk, Snap-on's Chief Executive Officer, and Aldo Pagliari, Snap-on's Chief Financial Officer. Nick will kick off our call this morning with his perspective on our performance. Aldo will then provide a more detailed review of our financial results. After Nick provides some closing thoughts, we'll take your questions. As usual, we have 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 Investors 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’s or the company’s outlook, plans or projections are forward-looking statements and actual results may differ materially from those made in such statements. Additional information and the factors that could cause our results to differ materially from those in the forward-looking statements are contained in our SEC filings. Finally, this presentation includes non-GAAP measures of financial performance, which are not meant to be considered in isolation or as a substitute for their GAAP counterparts. Additional information regarding these measures is included in our earnings release issued today, which can be found on our website. With that said, I’d now like to turn the call over to Nick Pinchuk. Nick?

Thanks, Sara. Good morning, everybody. As usual, I’ll start the call by covering the highlights of the third quarter. I’ll give you an update on the environment and the trends we see. I'll take you through some of the turbulence we've encountered, thinking about our performance. Aldo will provide a more detailed summary. The story of the Snap-on quarter is momentum overcoming challenges. Momentum rooted in the resilience of our market, the capability of our great team and the tactical and strategic advantages in our product, our brand and our models, all coming together to create considerable and ongoing strength. In effect, the third quarter once again demonstrated our ability to continue a trajectory of positive results despite the headwinds, and the numbers confirm it. Our reported sales in the quarter of $1.125 billion were up $64.8 million or 6.2% versus last year, including $39.1 million of unfavorable foreign currency. Organic sales grew 10.4%, with gains in every group, our ninth straight quarter of year-over-year expansion. And if you compare it to the pre-pandemic levels of 2019, you see a clear and unmistakable upward drive; versus 2019 sales, we're up 3% as reported and 2.8% organically, continuing our positive trend and accelerating our expansion, demonstrating that we're only getting stronger every day. I did say momentum. The quarter also bears the marks of Snap-on’s value creation processes: safety, customer connection, innovation and rapid continuous improvement (RCI). Once again, they all combine to offer significant progress. And progress to what? Operating income of $223.5 million increased $22.2 million from last year, and the operating margin was 20.3%, up 90 basis points from last year and rising 170 basis points over 2019. For financial services, operating income of $66.4 million compared to the $70.6 million of last year, a decrease reflecting the forecasted return to more usual provision levels. That result, combined with the operating performance, provided for a consolidated margin of 24.4%, up 20 basis points from last year and 120 basis points improvement from 2019. The quarterly EPS was $4.14, rising 16% over the $3.57 from a year ago and 39.9% over the $2.96 recorded in 2019, a significant gain. I said it before, and I'll say it again. We believe Snap-on is stronger now than when we entered this great environment, and the third quarter results are an unmistakable confirmation of that fact. Now let's speak about the markets. Auto repair continues to remain strong. The key metrics are all favorable: spending on vehicle maintenance repair, the vehicle technician count and technician wages are all up again. It's no wonder the repair industry is resilient. Repair spending is rising; the cars are more complex, they need more repairs, and it costs more. The technician count is at its highest point in three decades, and shop owners keep telling me they need more, many more. Wages are continuing to grow, reflecting the increased demand for the skills necessary to complete critical repair tasks. It's never been more evident that repairing a modern vehicle with the new technology is difficult. It's an exercise of extraordinary skill. And the salaries are rising to reflect that. Auto repair is resilient. When I meet with people at the shop, as I often do, our franchisees and our technician customers, you can feel their optimism in the now and their confidence in the future. They are making sure they can participate in that future by being ready with the tools they need. Vehicle repair is a field filled with opportunity. You can hear it in the optimism in the voices of shop owners, and you can see it clearly confirmed in Snap-on's performance. But it's not just the technicians; shop owners and managers are also big players in the repair market, and our Repair Systems and Information group (RS&I) is positioned to take advantage. Everybody knows that cars are scarce, both new and used. But for Snap-on, that doesn't matter. Repair and collision shops are busy. That's an area we like very much, and it’s evident in the rising sales of our undercar equipment and collision businesses, which are both strong. If you have a repair shop today, you see a bright future with changing technologies, and you want to be ready as new vehicles are being released with a greater variety of drivetrains than ever before, from internal combustion engines to hybrids to plug-in electrics to full electrics. The range of options is growing: more driver assistance technology, more automation, increasing vehicle complexity, and we're ready to help the repair shops keep pace with powerful products like a range of fast track intelligence diagnostics, the Zeus, the Triton, the Apollo Handheld, enabling repair at all levels, along with our celebrated Mitchell 1 ProDemand repair information, our award-winning Tru-Point advanced driver assistance calibration system and our 3D alignment systems like the new Hofmann Geoliner. All of these represent new technologies, and all leverage big databases deployed to make work easier in the shop. Vehicle repair looks more promising than ever, and Snap-On is positioned to capitalize. Now let's talk about the critical industries where the Snap-On brand rolls out of the garage solving tasks of significance. This is where Commercial Industrial (C&I) operates in our broadest region into international markets. C&I is dealing with the headwinds of supply chain disruption, rising commodity costs, uncertain fuel supply, currency fluctuations, continuing COVID lockdowns, troubled economies and war in Ukraine. Well, C&I has had its share of challenges. But it rises to the occasion. In the quarter, the group took some hits in Europe, but overcame these with strong gains in North America and Asia, despite the difficulties. While the military sector is still down, C&I's critical industries are showing life. So, I describe our C&I markets as challenged in certain geographies but demonstrating ongoing gains and strong possibilities moving forward. Coupled with our auto repair related businesses, we believe there is clear and compelling opportunity along our paths for growth, enhancing the brand network, expanding with repair shop owners and managers, extending our presence in critical industries and building in emerging markets. We have significant potential moving forward. The Snap-On Value Creation processes have never been more important, helping to counter the turbulence of the day. Especially crucial is the customer connection, understanding the work of professional technicians, and innovation, matching that insight with technology to drive new products. This quarter, Snap-On was recognized with five PTEN (Professional Tool & Equipment News) innovation awards and honored with two MOTOR Magazine Top Tool awards. An essential driver of our growth is innovative products that make work easier, and these awards are hard-won testimony that great Snap-On products just keep coming, matching the growing complexity of the tasks making them more essential to technicians and driving our positive results. Now let's turn to the segments. In the C&I group, sales in the quarter of $356.8 million were up 1.5% or $5.4 million as reported versus 2021, including a $26.2 million or 7.9% organic uplift, operating progress across all divisions, which was offset partially by $20.8 million in unfavorable foreign currency. From an earnings perspective, C&I operating income of $52.3 million, including $2.1 million of unfavorable currency, represents a decrease of $1.3 million compared to 2021. The effects of volume gains were more than offset by the substantial impact of currency and supply chain inefficiencies. The OI margin was 14.7%, down from last year, but still representing the highest level since the significant supply disturbances began. Compared with the pre-pandemic level, sales were up 7.7% organically, and the OI margin of 14.7% was up 30 basis points despite a 60 basis point negative impact of acquisitions and unfavorable currency. We remain committed to extending in critical industries, the C&I sweet spot, and we'll keep strengthening our position to capture those opportunities as they arise. Enabling that intent is our expanding C&I lineup of innovative products designed specifically to make critical work easy. One example is our brushless CT9015 18-volt drill, the newest member of our Monster Lithium family aimed at industrial manufacturing and repair professionals, enabling work with the toughest materials—470-inch pounds of torque, enough to handle even hardened alloys, with 2,000 RPMs for speed to get the job done quickly. And with heavy duty gearing and enhanced cooling, this tool is rugged and durable, even in extreme use. The 9015 also offers an 18-speed clutch, a variable speed trigger, and a two-speed gearbox, all for precise control, a feature that's essential for serious drilling. The 18-volt battery with 5 watt-hours ensures consistent output and extended runtime; in effect, less charging for a more efficient workday. The tool is also fitted with a 100-lumen headlight, helping technicians work in dark environments, just what is needed for those tough jobs. The CT9015 has power, speed, precision, and durability. It's a great tool, and technicians know it. They've already made the new drill one of our hit products, exceeding $1 million in sales. That's C&I, continued progress against the turbulence. Now on to the Tools Group. The team just keeps driving upward, leaving the pre-pandemic levels behind by a wider distance every quarter. Sales of $496.6 million were up $25.2 million or 5.3% over 2021. Organic growth of $34.1 million, or 7.4%, was partially offset by $8.9 million of unfavorable foreign currency. The operating margin was 20.6%, down slightly by 20 basis points but overcoming 40 basis points of unfavorable foreign currency. Compared with pre-virus 2019, sales were up $111.4 million or 28.9%, including a $113 million or 29.5% organic gain, and this quarter's 20.6% operating margin was up 680 basis points compared to 2019, coming out of the pandemic stronger indeed. The Tools Group is responding to the challenges of the day, increasing its product advantage, fortifying its brands, and further enabling the franchisees, guiding them to more selling capacity. It’s all working. You can witness it anytime you meet the franchisees. One big opportunity for that is our annual Snap-on Franchisee Conference (SFC), held this year at the Gaylord Texan Hotel in Dallas. The theme was breaking barriers, reminding us of our record franchisee performance, which has driven ever upward over the last nine quarters, and it's a recognition of our clear opportunity to reach even greater heights moving forward. Almost 8,000 individuals attended, and they were pumped, excited by the products. More than three football fields of our latest offerings were on display, all available for viewing, handling, and ordering. The conference also offered a variety of training seminars where franchisees could sharpen and expand their skills in selling the full range of our complex and broad product line. It's an important movement. We say we're working to expand the selling capacities; our advance during the SFC is a significant part of that effort, and Dallas was another great step forward in that direction. You can bet on it. Our entire team left this year’s gathering in Dallas educated, energized, and eager to extend the Snap-on difference, reaching new individual and collective levels of success throughout the base. They departed excited and strong. The Dallas SFC will lead to breaking barriers. The franchisees' enthusiasm for their businesses and their confidence in their future will drive this success. During the SFC, the Tools Group presented the newest addition to the Snap-on ratchet lineup: our FLLF80, a three-inch drive extra-long locking flex-head ratchet. This new innovation provides easy access to superior turning power. Our patented duality technology makes it stronger. The 20-inch length, the longest in the category, provides great ability to reach deeper into crowded spaces, extending reach and increasing leverage. It's a great addition to any toolbox. As an added bonus, the new patent-pending self-cleaning feature eliminates dirt and grime, ensuring that the flex-head locks firmly in place at any angle, even under high-stress applications. The X80 is a unique offering, combining access, leverage, and stability in one ratchet. The initial launch exceeded $1 million in sales, and volume continues to move forward upward. We are spending time working to expand franchisee selling capacity, harnessing social media, improving product training, RCI, and the van operations. This has been effective, and capacity is clearly on the rise. The Tools Group is on a very positive trend, ascending and leaving pre-pandemic levels behind. As we said at the SFC, we're breaking new barriers now, and we believe that it will continue. Now onto the RS&I Group. Sales of $414 million were up $14.9 million or 13.6%, including $60.8 million or 17.2% organic uplift. Growth was weighted toward undercar equipment and sales for OEM dealerships, but our information and diagnostics businesses also played a significant role in year-over-year improvement. RS&I operating earnings were $95.4 million, representing a $12.1 million increase compared to 2021, and the operating margin was up 10 basis points from last year to 23%. Compared with 2019, sales grew by $91.3 million or 27.2%, with an $86 million organic gain. The operating margin was down 20 basis points versus 2019, primarily reflecting the business mix and acquisitions; however, at 23%, it remains strong. We see significant potential in our runways for growth, expanding Snap-on's presence in garages with strategic acquisitions and a broad array of powerful products. Industry experts feel the same. In fact, our TRITON D10 Fast Track Intelligence Diagnostic units was just selected for an outstanding top tool award, and rightly so. The trend is ideal for shop owners and general technicians, providing a comprehensive system verification to identify troubled areas, diagnostic testing to pinpoint repair actions, and a powerful lab scope to confirm component-level functionality, all in one package. The D10’s advanced scoping capability helps users evaluate performance with comparative data, and its Fast Track Intelligent Diagnostics greatly shortens the work and streamlines the repair processes, making shops more productive and profitable. The unit also offers rugged hardware explicitly designed for tough shop environments, with a super-fast two-second boot-up and a 10-inch touchscreen. It all comes together for unprecedented reliability, speed, and ease of use. I assure you, technicians have stated that this product is revolutionary. The selection of the TRITON unit reinforces that Snap-on diagnostic units have been recognized by motor magazines for 22 of the last 23 years, which we believe serves as strong testimony that RS&I is more robust than ever in shops and dealerships. Those are the highlights for our quarter: Tools Group showing strong progress, C&I recording a positive performance, and RS&I expanding profitable volume with repair shop owners and managers, with overall sales rising again, 10.4% and 22.8% organically versus last year and pre-pandemic levels, respectively. OpCo operating margins were a robust 20.3%, rising again this quarter, up 90 basis points. EPS came in at $4.14, marking an increase versus last year and significantly outperforming pre-pandemic levels. It was yet another encouraging quarter.

Thanks, Nick. Our consolidated operating results are summarized on slide six. Net sales of $1.125 billion in the quarter increased 6.2% from 2021 levels, reflecting the 10.4% organic sales gain, partially offset by $39.1 million of unfavorable foreign currency translation. The organic sales gain this quarter reflects high single-digit growth in both the Snap-on Tools Group and the Commercial Industrial Group, with double-digit gains in the repair systems and information group. This growth compares to the 8.4% year-over-year organic increase recorded last quarter. From a geographic perspective, continued sales strength in the United States and several emerging markets more than offset weaker demand in Europe. Consolidated gross margin of 48.3% declined 190 basis points from 50.2% last year. Higher material and other costs were partially offset by contributions from the increased sales volumes, pricing actions, and benefits from the company's RCI initiatives, with 30 basis points of favorable foreign currency effects. Again, this quarter, we believe the corporation, through pricing and RCI actions, continues to navigate effectively the cost and other supply chain dynamics of the current environment. Operating expenses as a percentage of net sales were 28%, improved 280 basis points from 30.8% last year. The improvement is attributed to sales volume leverage and savings from RCI initiatives. Operating earnings before financial services were $223.5 million in the quarter, compared to $201.3 million in 2021. As a percentage of net sales, operating margin before financial services at 20.3% improved 90 basis points from last year. Financial services revenue of $87.3 million in the third quarter of 2022 was unchanged from last year. Operating earnings of $66.4 million decreased $4.2 million from 2021 levels, primarily as a result of higher provisions for credit losses compared to last year. Consolidated operating earnings totaled $289.9 million compared to $271.9 million last year. As a percentage of revenues, the operating earnings margin was 24.4%, compared to 24.2% in 2021. Our third quarter effective income tax rate was 21.6%, compared to 23.7% last year. The lower tax rate in the quarter was primarily due to tax benefits realized from favorable settlements of income tax audits. Net earnings of $223.9 million or $4.14 per diluted share increased $27.7 million or $0.57 per share from last year's levels, representing a 16% increase in diluted earnings per share. Now let's turn to our segment results. Starting with the C&I group on Slide 7, sales of $356.8 million increased from $351.4 million last year, reflecting a $26.2 million or 7.9% organic sales gain, partially offset by $20.8 million in unfavorable foreign currency translation. The organic growth primarily reflects double-digit gains in the Asia Pacific operations and specialty torque business, as well as a low single-digit increase in sales to customers in critical industries. Lower activity with the military was more than offset by gains in aviation, mining, power generation, and oil and gas. Gross margin of 36.9% declined 130 basis points from 38.2% in the third quarter of 2021. This is primarily due to increased material and other input costs, partially offset by benefits from higher sales volumes, pricing actions, and 20 basis points of favorable foreign currency effects. Operating expenses as a percentage of sales of 22.2% in the quarter improved 70 basis points from 22.9% in 2021, primarily due to the effects of sales volume leverage. Operating earnings for the C&I segment were $52.3 million compared to $53.6 million last year, with an operating margin of 14.7%, compared to 15.3% a year ago. Turning now to Slide 8, sales in the Snap-on Tools Group of $496.6 million increased 5.3% from $471.4 million in 2021, reflecting a 7.4% organic sales gain, partially offset by $8.9 million of unfavorable foreign currency translation. The organic sales growth reflects a high single-digit gain in our U.S. business, partially offset by a low single-digit decrease in our international operations, largely reflecting weakness in the United Kingdom. Gross margin of 44.9% in the quarter declined 90 basis points from 45.8% last year. The year-over-year decrease is primarily due to higher material and other costs and 40 basis points of unfavorable foreign currency effects, partially offset by benefits from increased sales volumes and pricing actions. Operating expenses as a percentage of sales of 24.3% improved 70 basis points from 25% last year, reflecting the benefits from higher sales volumes and savings from RCI initiatives. Operating earnings for the Snap-on Tools Group reached $102.2 million compared to $98.2 million last year. The operating margin of 20.6% compared to 20.8% in 2021 and to 13.8% in the pre-pandemic third quarter of 2019. Turning to the RS&I Group shown on slide nine, sales of $414 million compared to $364.4 million a year ago, reflecting a 17.2% organic sales gain, partially offset by $11.2 million of unfavorable foreign currency translation. The organic gain is comprised of double-digit increases in activity with OEM dealerships and in sales of undercar and collision repair equipment, along with low single-digit gains in sales of diagnostic and repair information products to independent shop owners and managers. Gross margin of 42.9% declined 390 basis points from 46.8% last year. This is primarily due to higher material and other input costs and increased sales in lower gross margin businesses. These declines were partially offset by benefits from pricing actions, savings from RCI initiatives, and 40 basis points of favorable foreign currency effects. Operating expenses as a percentage of sales of 19.9% improved 400 basis points from 23.9% last year, primarily due to benefits from sales volume leverage, higher activity, lower expense businesses, and savings from RCI initiatives. Operating earnings for the RS&I Group were $95.4 million compared to $83.3 million last year. The operating margin of 23% improved 10 basis points from 22.9% reported a year ago. Now turning to slide 10, revenue from financial services of $87.3 million, including $1 million of unfavorable foreign currency translation, was unchanged from last year. Financial services operating earnings of $66.4 million, including $800,000 of unfavorable foreign currency effects, compared to $70.6 million in 2021. Financial services expenses of $20.9 million were up $4.2 million from 2021 levels, mostly due to $3.7 million of increased provisions for credit losses. While provisions have increased versus the historically lower provision rate experienced last year, we believe that loan portfolio trends remain stable. As a percentage of the average portfolio, financial services expenses were 0.9% and 0.8% in the third quarter of 2022 and 2021, respectively. In the third quarters of 2022 and 2021, respective average yields on finance receivables were 17.7% and 17.8%. In the third quarters of 2022 and 2021, the average yields on contract receivables were 8.6% and 8.5%, respectively. The blended yield for the portfolio was 15.8% in the third quarter of 2022, which is the same as last year. Total loan originations of $300.2 million in the third quarter increased by $30.9 million or 11.5% from 2021 levels, reflecting a 12.5% increase in originations of finance receivables and an 8% increase in originations of contract receivables. Moving to slide 11, our quarter-end balance sheet includes approximately $2.2 billion of gross financing receivables, including $2 billion from our U.S. operation. The 60-day plus delinquency rate of 1.5% for the United States extended credit compared to 1.4% in 2021 and 1.7% in the pre-pandemic period of 2019. On a sequential basis, the rate is up 10 basis points, reflecting the seasonal trend we typically experience between the second and third quarters. As it relates to extended credit or finance receivables, trailing 12-month net losses of $42.2 million represented 2.41% of outstandings at quarter end, and were down 7 basis points as compared to the same period last year. Now turning to slide 12, cash provided by operating activities of $129.9 million in the quarter compared to $186.4 million last year. The decrease from the third quarter of 2021 primarily reflects a $63.5 million increase in working investment. The change in working investment dollars is largely driven by greater demand, resulting in increased receivables and higher inventory levels this year. In addition to demand-based requirements, the inventory increase also reflects higher in-transit inventory amounts as well as incremental buffer stocks associated with supply chain dynamics in the current macro environment. Net cash used by investing activities of $57.9 million included net additions to finance receivables of $38.2 million and capital expenditures of $20 million. Net cash used by financing activities of $120.7 million included cash dividends of $75.7 million and the repurchase of 228,000 shares of common stock for $50.2 million under our existing share repurchase programs. As of quarter-end, we had remaining availability to repurchase up to an additional $396 million of common stock under existing authorizations. Turning to slide 13, trade and other accounts receivable increased $56.7 million from 2021 year-end. Days sales outstanding of 60 days compared to 58 days at 2021 year-end. Inventories increased $151.3 million from 2021 year-end. On a trailing 12-month basis, inventory turns of 2.6 compared to 2.8 at year-end 2021 and 2.6 as of the pre-pandemic third quarter of 2019. Our quarter-end cash position of $759.3 million compared to $380 million at year-end 2021. Our net debt-to-capital ratio was 9.3% compared to 9.1% at year-end 2021. In addition to cash and expected cash flow from operations, we have more than $800 million available under our credit facilities. As of quarter-end, there were no outstanding amounts under the credit facility, and there were no commercial paper borrowings outstanding. That concludes my remarks on our third quarter performance. I'll now briefly review a few outlook items for the remainder of 2022. We anticipate that capital expenditures will be in the range of $90 million to $100 million. In addition, we currently anticipate, absent any changes to U.S. tax legislation, that our full year 2022 effective income tax rate will be in the range of 23% to 24%. I'll turn the call back over to Nick now for his closing thoughts.

Thanks, Aldo. It was quite a quarter. A staggering number of media pieces have exhaustively documented the modern-day turbulence that marks this period. So, we all know the challenges are many and substantial. But despite the headwinds, Snap-on stayed on track, and that momentum shines through in the quarter across all our groups, all of them. C&I grew 7.9% organically, extending its position in the critical with robust gains in North America and Asia Pacific, overcoming the variations in Europe, registering an OI margin of 14.7%, the strongest since the supply chain disruptions began in earnest. The Tools Group, we believe the franchise network is stronger and more capable than ever. Sales up 7.4% organically, OI margins of 20.6%, down 20 basis points, but against 40 basis points of unfavorable currency, representing a rise of 680 basis points above 2019. RS&I aggressively expanded with repair shop owners and managers, growing organically 17.2% over last year and 27.2% over the pre-virus period. The OI margin was a strong 23%, resulting in an ongoing upward trend for the corporation. Activity rose 10.4% organically versus last year and 22.8% compared with 2019. OI margin ended up at 20.2%, up 90 basis points from last year and 170 basis points above the pre-pandemic level. Lastly, EPS was $4.14, a notable gain of 16% compared to 2021 and 39.9% compared to 2019. It was an encouraging quarter, and we are convinced of an extremely promising future. We believe that the resilience of our markets, co-authored by critical tasks and changing technologies will drive opportunity even against the wind. Our strength in customer connection and innovative products, combined with the special power of our brand, positions Snap-on to fully participate in these opportunities. We believe that the considerable capability of our experienced team can navigate any turbulence, and these unique advantages will maintain our substantial momentum, breaking barriers and achieving new highs through the remainder of this year and beyond. Before I turn the call over to the operator, I'll speak directly to our franchisees and associates. I know many of you are listening in. The encouraging performance we've detailed today was made possible only by your individual efforts and collective actions. For your extraordinary success in delivering yet another strong Snap-on quarter, you have my congratulations. For the unique skills and capabilities you've demonstrated in overcoming today's challenges, you have my admiration. And for your unwavering confidence in our future and your continuing commitment to our team, you have my thanks. Now, I'll turn the call over to the operator.

Caroline, can we take our first question?

Yes. Sure. So we will take the first question from the line of Gary from Barrington. The line is open now. Please go ahead.

Hi, good morning, everyone. A couple of things here. Could you, first of all, quantify how much currency impacted EPS this quarter?

It was $0.09, Gary.

$0.09. $0.09.

Okay, thank you. And then, Nick, you mentioned that there was some pretty good robust order flow out of the conference that you had this year. Can you maybe give us a quantifiable range of what that was year-over-year? And then where was there really particular interest on the part of the franchisees and specific Tool Groups? Was it storage, diagnostic, just general households, whatever?

I'll tell you that I heard someone mention double-digits versus last year. But look, I want to quickly say, these are orders; they're not sales, people order. So we had a pretty robust number. I don't like to reveal the exact number, but orders of that level are better than average. So, we feel pretty good about this. Where it was ordered, I think tool storage was terrific in this quarter. Hand tools were very strong. Big packs did pretty well. Big packs are comprehensive sets that people order. We saw positive results across those categories. Everything performed reasonably well, but the big-ticket items were significant this quarter.

Okay. It seems that you're having some audio issues, but I think...

I'll say it again. Big orders. They were big orders, something like double-digit growth, but they are orders. Generally, if you ask me to summarize the performance, I think the big-ticket items were pretty strong for us. Also, we have something called big packs where franchisees order comprehensive arrays of tools, and so those were also doing well, especially hand tools.

Okay. And just one last one, if I may. In terms of diagnostics, are your diagnostic tools fairly drivetrain agnostic, or do you actually have a specialized diagnostic product that is just systemic to electric vehicles?

No, we would probably not do that. We would likely include all types of drivetrains in one tool. We wouldn’t necessarily have one dedicated tool because you have hybrids and various types of vehicles. The beauty of the diagnostic unit is its ability to repair everything. The goal is to plug it in regardless of the car's make or model. Therefore, the coverage is comprehensive.

Okay, thank you.

Yes, sure.

Thank you. We will take the next question from the line of Bret Jordan from Jefferies. The line is open now, please go ahead.

Hey, good morning guys.

Good morning.

Nick, you mentioned RCI opportunities at the van level, I think, in the prepared remarks. Could you talk about maybe in greater detail what you're doing there?

Well, there’s a couple of initiatives. One of the key things we are improving is our application of social media for outreach. The idea is to pre-brief customers effectively so that when our team visits shops, they know the products and promotions ahead of time. This allows franchisees to invest their limited time with customers, customizing their pitches accordingly. That’s one significant opportunity we are making strides in daily, which has enhanced our effectiveness. Additionally, there are improvements in collections, taking inventories on the vans, adjusting to faster computer systems, and providing status updates on orders—which is a big deal with current demand dynamics.

Okay. And then, Aldo, a quick question on the financial services. You've mentioned sort of higher provisions. Could you talk about maybe what you're seeing and a cadence of what you're seeing as far as the credit books and the mechanics?

Bret, good question. We actually saw exceptionally strong performance in 2020 and 2021. You read about it from other companies that people serviced their debt more aggressively, bringing it down, and people have been generally more current than ever. Consequently, we had unusually low provisions in 2021. Currently, we are starting to revert to a normal pace of activity. Even in the quarter, compared to 2017-2019, the provision rate remains lower than during that era. So overall, the performance of the portfolio is stable, and the leading indicators suggest we will continue to do well in the credit company.

Okay, great. Thank you.

Thank you. We will take the next question from the line of Scott Stember from MKM Partners. The line is open now, please go ahead.

Good morning and thanks for taking my questions. Can you talk about sell-in to the channel, the van channel versus sell-out? Is it fair to assume that things are pretty much one for one, or was there any coming...

Yeah. In each quarter, it varies, but this quarter was pretty much one-to-one, perhaps even slightly better, but generally, sell-in and sell-out were aligned.

All right. And then, RS&I, you talked about undercar equipment. Can you provide a little more granularity? Was that related to collision repair, or was that just everything?

Actually, everything sold in for undercar. Collision repair is a big focus right now, driven by the complexity of modern vehicles. For instance, when you simply dent a bumper, it inadvertently requires recalibrating numerous sensors, resulting in costly repairs. Collision shops must upgrade equipment to efficiently restore functionality and shape. However, the other basic products we sell, like lifts, are also doing very well.

Got it. And just one last question. Obviously, you guys have put up some stellar results these past couple of years, but the uncertainty for next year comes from the potential recession. Could you provide an idea of what we should look out for as a potential canary in the coal mine that will give us an early warning sign?

Well, first of all, I have to say, when you walk into the garages, you don't hear a talk of recession. But if you're talking about canaries in the coal mine, you'd generally see a reduction in bigger-ticket items around the time of less confidence in the future. Repair needs continue regardless; however, people may pivot to shorter payback items when uncertain about the future. That typically happens during financial recessions. But as it stands, we had robust performance from our big-ticket items.

Got it. That's all I have. Thank you.

Thank you. We will take the next question from the line of Luke Junk from Baird. The line is open now. Please go ahead.

Good morning. Thanks for taking the questions. First, Nick, just curious to get your perspective on investment posture of the company, given the macro backdrop, especially regarding maintaining momentum in the Tools Group right now. What are the key considerations around investment if we face a choppier macro in RS&I and C&I as well?

Well, look, I don't remember restricting our investments in the business throughout two major downturns—the financial recession and COVID. If we believed it was crucial for the future and beneficial for our customers, we went ahead. Snap-on may operate a little off the bubble, but we’ve always continued investing, never really laying off personnel. I expect to operate in the same manner.

Okay, thanks for that. My question revolves around margins and profitability as we enter next year. Specifically, recovering pricing costs, as we can see the impacts of higher material prices.

I think in the Tools Group, we generally control the customer interface; hence, we believe we can raise prices in visible inflation. We were encouraged this quarter. The Tools Group had a robust performance, considering the unfavorable currency impact and their growth over 2019. Regarding C&I, it’s slightly more complex, but they are fighting against turbulence in terms of both geography and sector—and they're making progress. Generally, costs have variations, but we are beginning to see a positive situation emerge in the pricing landscape.

Thanks for that. Also, if I can sneak in a quick question for Aldo on the credit business. What I'm hoping for is to parse through the decrease in credit income and also the provision-related impacts on a year-over-year basis.

At the highest level, when COVID hit, there was a lot of uncertainty. We might have over-reserved initially, resulting in higher provisions than necessary. Consequently, provisions in 2021 were lower than usual. Now, as we return to normalcy, we are seeing a more typical pace of activity. The balance sheet remains strong, with a portfolio that features slightly better characteristics. Thus, even with the normalized credit provisions, we believe we still have a relatively lower risk profile in our portfolio.

Okay, great. Thank you for that follow-up.

Thank you. We will take the last question from David MacGregor. The line is open now. Please go ahead.

Yes, good morning, everyone. Can you hear me, okay?

Yes, I can hear you.

I wanted to just build on that last question regarding the tools segment. You reported 7.4% growth, which I assume meant the bulk of that was pricing since volume might have been up low single-digits. But I'm sensing that's not true?

No, I would not say pricing is the main driver. The calculations can be quite complex. We have list prices that don’t all flow, and we offer promotions at various levels. Generally, we believe that pricing might account for half of the growth, meaning volume still significantly contributed. So you may be correct that it wasn’t precisely low single-digits, but it wasn’t negligible either.

Sure, understood. If we assume that pricing is closer to 300 basis points with 400 basis points of volume growth...

Indeed, there’s pricing involved that as you described through list price calculations can become intricate.

Yes, understood; I was seeking clarity within the credit business. You've always been adept at managing that portfolio's quality, and I anticipate that will remain the case going forward. Would you ever consider lowering what you charge on extended credit from that 17%, 18% yield to make it a bit more accessible?

We constantly evaluate our pricing strategy but have maintained our course for a long time. Our rates generally align with the credit profile of our customers. Thus, despite our regular reviews, I do not foresee significant changes occurring in the immediate future.

Got it. Thank you for addressing my questions.

Sure, anytime.

And that was our final question. 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 in Snap-On. Good day.