Thank you. We will now begin the question and answer session. If at any time your question has been addressed, and your first question today will come from Scott Stember with Roth MKM. Please go ahead.

Good morning, and thanks for taking my questions. Good, guys. Nick, yeah, you were talking about, obviously, it sounds like the shops are still relatively strong, but the confidence for the technicians is falling even further than before. So what's the game plan here? Do we see opportunities to further pivot to lower-priced items? Or is there something else that needs to be done?

No. I think there's a couple of factors there. One is the pivot worked in the first quarter. It's just I don't think we've seen a place where the hits just kept coming so much. I mean, when the administration itself says there will be pain, this is kind of unprecedented. And you can see it in consumer sentiment. If you look at those numbers, you see the drop from December is precipitous. And so we didn't know about that when we were talking to people. You know, we talked to franchisees all over the country and come in and we heard that in the shops. And really, what it is is our pivots worked. I talked to some of them that did pretty well. Some of those sets I talked about sold well. Some of the products in, you know, like the cart sold well. What we learned in the period, I think, is a little bit different. We were pivoting to what you would call standard short quicker payback items. But what we found if we tailored things at the bottom end of the bigger ticket items, like carts that simulate a box. Like the Solus, which is at the bottom of the diagnostics, we could make hay with those as well. Now you can't say you made great hay when you're down six point eight percent organically. You know, but that's really what we saw in that situation. So we're gonna keep pivoting because we saw it continue traction. It just got overrun. This was an unusual period. I think anybody that says it is an unusual period isn't reasonable. Wall Street Journal is seeing tariffs in two hundred fifty-four times. And so the thing is, that's what we saw. So we think the pivot, we learned some things on how to make the pivot better. So we're gonna continue to do that. And we'll learn from those things as we adjust. We're pretty confident that this works. You know? And if you don't believe it's America, look at the outside the United States. Outside the United States, less affected by all this turbulence in recent days, all that stuff, all those businesses went okay.

Got it. And then if you're looking at RSNI and C and I, RSNI, in particular, if you were to back out the intercompany declines, which I assume had a pretty big impact there, what would the organic sales rates in RSNI have been?

It's about, it's about, it's a little bit better. I think it's, you know, the organic rate was about three point seven percent. If you backed out the intercompanies, you're probably in the four range. Something like that. Maybe a little bit better in that situation. RSNI, the big thing about RSNI is it's software-packed these days. Software was up more than the increase in that. And the cool thing about it, Scott, is if you look at the RSNI division, almost all of them are up nicely profitability. So they're hitting on all cylinders. They really did have a strong quarter. And if you look back, it's been a strong quarter after strong quarter after strong quarter. Now I realize some people may have thought they could have done better. They might have sold more. You could have argued that maybe a percentage point more. You could have thought that. But twenty-five point seven percent, up a hundred and forty basis points is a pretty good quarter. And it's driven on the strength of their product and the increasing ability to affect the database. AI is part of that. Part of the reason why the databases are getting better and more effective is we can now translate what the technicians say about the repairs much more efficiently into a database without as much time. So we're able to move forward in building that database much more effectively. And that's helped us in this situation. But you can see there that even in diagnostics, we're making them pretty well positioned against the tariffs.

Got it. And then the last question before I go back in the queue. It sounds like the military had a pretty profound impact on critical industries. Was that having anything to do with these DOGE movements, or is there something you know that we should expect to see in the quarter?

No. I don't know if it had anything to do with the Doge. I think it more had to do with people trying to...you got budget cycles in there. But I will tell you, Scott, we saw it in the Biden administration. Anytime the administration changes, the new sheriff in town won’t be pushed around, you know. And so the thing is they changed; they start talking about the procurement processes and so on. Slows everything down. And then after a while, the warfighters kind of say, you know, the fifty caliber bullets when they go overhead, I'd like to have better tools, you know. I don't want to have somebody else's tools or tools that are missing, and everybody caves and it goes back to normal. So I think that's really what you're seeing mostly in this situation. I don't think it was associated with DOGE except for maybe, Scott, the psychology of the Doge sword waving overhead of all government employees. But I don't know how to evaluate that. It was significant, you know, without... let's put it this way. Without the military downturn, C and I would have been up.

Gotcha. Alright. That's all I had. Was enough. Everything else was good, you know.

Awesome. Thank you so much. Sure.

And your next question today will come from David MacGregor with Longbow Research. Please go ahead.

Good morning, everybody.

Morning, David.

Good morning, Nick. I wanna start off with just asking truck level sales comps. What do you think those look like this quarter in the US?

Say that again. You said truck. You mean the vans? Yeah. I mean, the van sales comps. Yeah. Sales comps off the van. They're about the same as we saw it to the van. You know, about that same level. It pretty much matched up in this quarter. It isn't always matched up in a quarter, but this particular quarter was kind of dead on, you know. Pretty much the same. So they sold to them about what they sold off the van. I don't know what you make of that because it always rolls up and down as you know because you've followed us for years. You know, it kind of usually varies from period to period. But this was one of those that matched up. But you didn't see any destocking at the truck level? No. We didn't see that. Now there could have been some. You know, but I don't think so. I think it's because the numbers match. Of course, it's an imperfect situation. And I will tell you that the franchisees start to get daunted when they hear the technicians talk about these things. But the franchisees have a lot more, I would say, cushion to deal with what I said would be out-of-the-wall things. Off the rails things. I think really what happened is reflected in customer sentiment. Maybe some of the franchisees got some of that thing. But there wasn't much destocking.

And then you talked about negative mix in the tools segment. I'm trying to reconcile that with the narrative Diagnostic. Big ticket.

Diagnostics. The low-end diagnostics sold. Remember I said that's why the Solus thing in there. One, we learned something about it that we could chip away at the bottom end of the big ticket items and have success. If we position them and program them correctly. And diagnostics driven by that low-end, the Solus, you know, the speedy one and cheaper, was up in the quarter. And anytime diagnostics is up in a quarter, it's a weight on Tools Group's margins because as you know, they share the margin with the RSNI group.

Right. So what would hand tools have looked like, Nick? Just to isolate that category. Hand tools were not up, but they were certainly not down the way tool storage was. Tool storage was a killer. And if you look at the originations in the quarter, you can see it. You know, coming out of last year, the originations were up five point eight percent. We're down five point eight percent but they're down almost double in this quarter, eleven point seven percent. And I think that's it all. You know? Okay. How do you respond promotionally to the weaker demand?

Well, you know, our margins, our gross margins in the Tools Group were down some, but some of that has to do with the with the mix I just talked to you about, you know? And we cannot change prices that much. I mean, certainly across the corporation, I would say the fifty point seven percent gross margin is ample evidence that, you know, up twenty basis points when your volume is down like this, is ample evidence that you aren't giving it away in pricing. So while we do get more active in promotions and we try to make it more attractive to the customer, we're not out there begging for volume. You know, I don't like that. And so we don't do that. And, Nick, can you talk about the regional kickoff?

You talk about the regional kickoffs and just where orders up or down this year? And by how much?

The regional kickoffs were down this year, and I'm not gonna give you how much because it was distorted, David. It's hard for us to evaluate because you know you know, not not so great is that several of them were affected by snow. And so what happened was somebody's region. I was at one. You know. Some of these regions I'm saying some of these regions are pretty big, you know. And so snowstorms were bearing down till people left early. And so we didn't quite have the full participation that we like to have in those situations. So it was hard for us to evaluate. It was one of the things that was difficult to evaluate. What was happening in the quarter in the beginning because we looked at those and a lot of them were subject to these kinds of one-off type weather situations. And so weren't sure what to make of that, but you know, when you talk to the techs themselves, you could hear the starting to break through, especially as we started to get later in January when you started here. After the inauguration, everybody loves the archives, love the administration. Like I said, I think I said last quarter, it feels like they're on Space Mountain. They're afraid they’re gonna go off the rails.

Right. Last question for me is just on manufacturing capacity. And, you know, you've obviously done a lot there recently, but I'm also guessing that backlogs are direction. Can you say by how much your backlogs are down and what product categories you may be seeing the greatest backlog depletion?

Total storage? Remember, we used to have, remember about a year, a year and a half ago, we were up to our eyeballs until storage backlog. Well, it's kind of liquidated that one. We expanded our Albona facility and the demand has dropped off for the big ticket box. Now we shifted more capacity to lockers and carts and so on, which is I think one of the things we have confidence in going forward. So we think we're in a good shape. I mean, we don't have a lot of backlog everywhere. Now, certain products are backlogged, swivel sockets, for example, have a little bit of backlog. You always have some kinds of things. But generally, expanded capacity has put us in the right position. That's why we think one of the reasons why we think we're advantaged for the tariffs. You know? We are available for American production.

Got it. Thanks very much.

Okay.

Your next question today will come from Gary Prestopino with Barrington Research. Please go ahead.

Good morning, everyone.

Morning, Gary. And if...

Nick, you mentioned in your opening comments about the fact that hours worked were down. Yeah. By technicians as well in the quarter. I mean, you know, vehicle repair is generally kind of mission-critical. So could we assume that that was less elective maintenance kind of services? Or would you agree with that?

You know, Gary, I put that in because it's a fact. You know, hours down, hour hours worked, in the rolling twelve was up. Both single digits, but it was up. In the last couple of months, it was down. You know, I want to say three point three percent or something like that. I'm not sure what that means over a couple of months, you know. It does mean, I suppose, that some of the garages aren't relatively white-hot, you know, in the last couple of months. But wintertime, that could mean a lot of things. So in normal times, you know, lately, those things and lately, all the metrics in vehicle repair have been monotonically improving, improving, improving, improving, improving. And I suppose we're kind of sensitized to the idea for a couple of months if there was a drop-off, and it got my attention and some other people's attention. But I'm not sure what to make of it as a long-term trend. We would believe if hours are down, it probably is elective elective things because you gotta have your car. You know, so you would think that would be the case. And maybe some people are worried about hooking you off the rails scenario. I think one of the things you do see is you see consumer sentiment is down. You see our numbers down. But you see other people say, well, consumer activity is strong. But I think they're dealing with a different FICO ZIP code. FICO ZIP code, you know, better better better credits, dot dot the more the better healed people than maybe the mechanics in the garage. So and I think that's part of what we see. Ourselves, Aldo, I think said, in his presentation that our own yield dropped from seventeen point seven percent to seventeen point six percent, and that really is the people who are who are originating loans for us are better credit risk than they were before. And so it just means that the people at the bottom end are too reticent. They're too afflicted by the uncertainty. So maybe you see some of that in the garages too. I don't know. I because I think people gotta repair the cars. You know? Sooner or later, you gotta go in.

Right. Alright. Thank you. And then just lastly, could you maybe comment on you made a lot of references to the fact that you know, this whole issue with tariffs coming up could have impacted technician confidence. As you went through your quarter, did things really accelerate on the downside starting in March? You know, one could take away from what you were saying that a lot of the impact in the Tools Group, in particular, was due to the uncertainty regarding tariffs, and that kind of cropped up in March. So you can maybe give us a go ahead.

I would say, Gary, for the guys I talked to, it wasn't only tariffs. You know, you come out and you're saying, okay, we’re gonna reduce the government, but then they start, you know, I have no political; there's no political commentary, but they are laying off people. It seems like willy-nilly, you know. In other words, no one knows what. And so I think the people who work, even though they truly believe in the trajectory and the goals of the current administration, they're saying, I don’t know how they can change all the government this much and not come out with some screw-ups. And then you start hearing stuff like Greenland and Panama and Gaza. You hear that stuff. And so even before they started talking about the tariffs, people are saying, jeez, I don’t know. And what's really happening here? I'm worried that the world's gonna come off the rails, and the tariffs came over the top. So that's a long way of saying. I don't think things changed so much. I wouldn’t say it got worse. I think it just, in general, this was a continual statement that people said, I don’t know. Our people, after all, aren’t really affected by the tariffs. But they’re kind of saying the broad view. I don't know if some administration can do this many things. You know, coming up with new ideas every day, and not strike out a few times that might screw us up badly. That’s the general view. Now tariffs tariffs is a different thing. It more affects the companies. When I say the fog in tariffs, I’m talking about at Snap-on level or the company level. As dominating everybody. Everybody wants to, by the way, everybody wants to talk about tariffs. Anybody who wants to talk about tariffs. And so it is a fog that does affect technician and it affects a lot of different things. We just say, in that fog, as we look forward, we think we’re advantaged.

Okay. Thank you.

Hi. Good morning.

Good morning, Sherif.

Just, within the Tools Group, are you able to give us a sense of how the demand drop looked throughout the quarter? Maybe a bit of cadence. Is there anything?

No. You know, Sherif, it's hard to say. You know, usually, usually, things are different from week to week. This quarter was more uniform. You know, it wasn't just like I tried to explain to Gary a minute ago, you know, it started out, we thought and there was, really bad weather. So sometimes you can say, oh, okay. It's bad weather. And that happens often at the beginning of the year. Because volumes are always light. And so you're like that that legend, the princess, and the p. Any little change will affect you. And but it kept being weak. And, you know, when you talk to people, once the administration got in place, they started listing and they're saying, geez, are guys getting a little over active, let's say. And then that's when they started to worry about the world. It's interesting when you talk to the people at work, you know, the technicians and the guys in the factory. They're pretty savvy on this stuff. I think it's because they don't have that much vision. And so they're very sensitive to this. We found this all through, you know, a lot of different situations. And in some ways, there's a canary in the coal mine because that's what I've been talking about uncertainty for some time.

Understood. And, you know, we've talked about this dynamic of a shift to quicker payback items for quite a while. Have you seen any shift in the quarter just with regards to the volume? Is that purely just a harder shift towards this trend, or are you seeing lower demand for even some of the quicker payback items as well?

Well, yeah. We did see some, but we, you know, look, I'm just telling you what I think happened from a lot of interviews. You know, windshield surveys and fortified by the metrics of the customers' consumer sentiment numbers. But if you look at it, we had our I the things I put up on the in the event, like, you know, in the in the in the script and the in the discussions, you know, like soulless big hit. Synergy, paired with the flank drop pockets, low pro big hit. You know, the idea so those are low payback items that are big hits. The sturdy tool storage cart, I’m presently holding two hundred and forty-foot pounds big hit. So you had hits in the lower playback items. We had almost no hits in the big payback items. So you could see the progress. I just think, like I said, my assessment, and I think this is played out as some both quantitative and qualitative support from interviews and from the consumer sentiment numbers, is that the effects of the last quarter on the general populace popped off by the tariffs were so pervasive that they outran our progress in those things. So I think we made progress in our performance; it's just everything else kind of dropped. But the stuff we focused on seemed to work. It's just the things you can't focus on everything.

Understood. Thank you for the call.

And your next question today will come from Luke Junk with Baird. Good morning. Thanks for taking questions. Nick, wanted to start in terms of how you can play offense in this environment and maybe just stay finer point, thinking mostly about the tools group in terms of marketing, kind of the balance of engaging franchisees versus engaging with technicians directly, and in terms of investments and the steady pace of investment, just where we might see you look incrementally in terms of allocating dollars this year?

Well, I think I said it. I think we're kind of encouraged by the idea that we can chip away at the lower end of what you might call our traditional big-ticket items. You know, after you run the programs after a while, you know, on, and so like hand tools and power tools and the other stuff, you know, you kind of gotta recycle some. And so now we found a new and pretty successful area at the lower end of that. You know, like Solus. Which is way cheaper than, say, a Zeus. You know, or a cart, which is way cheaper. I mean, it may be a factor of four cheaper than a big epic unit. And so you feel as though that's the kind of thing you can focus on. So we're kind of encouraged in that position. And then of course, you double down, you try to make sure that more of your new product introductions are in the area where you can have effect. You don't want to spend a lot of time worrying about, so you shift resources from the top of the line diagnostics from the things like from things without some of those are already in pipeline sometimes or or things like epic tool storage boxes or anything that's very expensive. And you try to hit that sweet spot and put most of your development and promotion resources in those areas. So we continue to do that. And particularly when we see this because what happened in the quarter was the program seemed to work; the other stuff didn’t. So the general level draft because of uncertainty. So we think we can hit; it's just a matter. That’s why I say that stuff overran us. You know, you can think about this, that program’s successful the other products sort of the underlying base dropped in this quarter beyond where it had been before. And so what we'll try to do going forward is focus on those in terms of product. Then in terms of we've got some ideas around getting to the customers. You know, we're constantly evolving the idea of social media and putting out a little shorter videos, kind of a version of TikTok going on, you know, Snap-on a network. We're trying to do that. That tends to work for us, but we might have done that anyway. I'm not sure, Luke. You know? But, I mean, that's where we'd allocate some resources.

Got it. You know, we've talked a lot about the technician side in terms of sentiment and just how they're reacting to the environment. What about franchisees and the folks that you're spending time on? I guess I'm thinking especially of things like cushion and how they might be thinking about working capital in their businesses, be it inventory, their payables, extended credit, those sorts of things?

Yeah. I, you know, look, I think, I think, well, it's down. But it's not bad compared to pre-pandemic levels. You know? So and they're the same franchisees. So I don't think we quite have, you know, even though know, this is not something we are cheering about or something like that, it's hardly threatening. It's not enterprise-threatening for Snap-on. You can look at the cash flows. I mean, the cash flow is down, but we aren’t ringing our hands over trying to figure out where to get cash. We're not going to step back from anything. And most franchisees are in that situation. Now there are some in which the idea is, like always, down at the bottom end, they may be threatened in this. We try to work with them to make sure they can survive the situation. That's another place where we'd spend time. To try to make sure that the terminations, you know, the exiting in a franchisee stays right in the same place. And more or less for government work, it has stayed in the right play in the same place. It's just in this environment, it's a little harder to get people to move because everyone, you know, who might be a franchisee is in fact somewhat confidence-impaired in this situation.

Got it. Thanks, Nick. Appreciate the comments.

And your final question today will come from Patrick Buckley with Jefferies. Please go ahead.

Hey, good morning, guys.

Morning.

Could you talk a little bit more about recent dealer sentiment? I guess, Liberation Day and all the auto tariffs were more of a q two events. So anything notable to call out there to start the quarter?

What do you mean by dealers? You mean automotive dealers?

Yeah. And just demand for tire spend.

Like Chevy dealers?

No. The auto dealers.

Yeah. Like, yeah, like a Chevrolet dealer or a BMW dealer?

Exactly.

Look, I don't think we saw any particular move in that situation. Here's the thing. You know, in our org, it doesn't really for sure make any difference what happens with new cars. Not for sure. In fact, the dealerships make... you're probably very familiar with this because I think you look at. They make a lot of money on repair and spare parts. And used cars. They don't make so much money on new cars. So if the new cars if you have pair of problems in the new cars at the auto company, spitting up blood all over the ID, they've got tariffs. Going back and forth. The Canada, it doesn't make that much difference I think, for the dealerships. Now the dealerships moan about not having new cars. But I do remember during the pandemic when they didn't have new cars, their margin were at an all-time high, I think. So I don't think being in the back shop, it doesn't affect us so much. And so when I talk to dealerships, they will moan about the worry that boy, if they can't get cars they are gonna lose some and if asymmetrically they have fewer cars and say their competition in the area, they may lose the customer bases that they've worked so hard to build up. There's that kind of thing. But I don't think for the near term, that makes much difference for our business. With them. I don't think they pull back. They might. Some of them do, but some of them actually think in those environments that they wanna invest and repair more because, you know, they're not gonna get new cars, so they gotta they gotta get the cash flow out of repair. So sometimes they wanna do that in situation. So it's unknowable in that situation. I suppose the one caveat to that is, Patrick, is that to the extent we are commissioned by programs with the OEMs, that could be affected by turbulence. With new cars. And all this noise with the tariffs. We haven't seen it so far though.

Got it. And then I guess, you know, looking at the Tools Group, it seems like international sentiment was a bit higher than the US. Could you talk about maybe some of the drivers there and the outlook for the international segment there?

Sure. The international segment isn't worried about any of this stuff. They're not worried that Donald Trump's talking about Greenland and Gaza and, you know, the Panama Canal. They're not worried about, you know, they’re really worried about at the grassroots level at the grassroots level. I don't think they're worried about you know the idea that, you know, they're gonna tariff China a hundred and seventy percent or whatever. They're gonna or two hundred forty-five percent. I'm not sure what the number is these days. But I don't think they're so worried about that. You know. And and you know, it's kind of proportional to where they sit. So Canada is probably more worried because of tit for tat with with Trudeau and so on. I think, impacted them some. But if you look at Australia, the UK, they're kinda off-shore, you know. And so that I don't think we see much of an effect in those places. And I think that's simply because the whole cash-rich confidence-poor phenomena has always been from the beginning when we started to see it, a US phenomenon.

Great. That's all from us.

Okay. This concludes our question and answer session. I would like to turn the conference back over to Sara Verbsky.

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.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.