Good day, and welcome to the Snap-on Incorporated 2025 Second Quarter Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touchtone phone. And to withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Ms. Sierra Verbski, Vice President of Investor Relations. Please go ahead, ma'am.

Thank you, Chuck, and good morning, everyone. We appreciate you joining us today as we review Snap-on's second quarter results, which are detailed in our press release issued earlier this morning. We have on the call 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've 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 Investor 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 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. Thanks, Sarah.

Good morning, everybody. As usual, I'll start the call by covering the highlights from our second quarter. And I'll tell you right now, we're encouraged by the results. Resilience and balance against an environment that's been quite turbulent. It's like one long mad minute where the commercial ground keeps shifting. But with the resilience of our markets, the balance of our portfolio, our advantages in products and brand and people, we navigated the roller coaster and exited the quarter stronger than when we entered. So that's my view. And as we proceed today, I'll fill you in with more color on our financial results, on our markets, the current environment, the progress we made, and I'll give you another take on what I think it all means. Then Aldo will move to a more detailed review of the financials. Let's talk about the results. Our sales of $1,179.4 million, as reported, were flat to last year, including $8.6 million in favorable foreign currency translation. Organic sales were down 0.7%, and they were mixed, but overall balanced. Opco operating income for the quarter was $259.1 million, 7.6% below last year, which included $11.2 million from the non-recurring 2024 legal win. OI margin was 22.0%, lower by 180 basis points versus last year, which included 100 basis points from that legal matter. Notably, the gross margin was 50.5%, 10 basis points behind last year, reflecting continued resilience. Rapid continuous improvement balanced 50 basis points of unfavorable currency transactions. In effect, our Opco-OI gap primarily represented our ongoing investment in maintaining and strengthening our advantages of product and brand and people, believing as we did in the pandemic that it's best to emerge from the disruption at full strength, and we believe we're on course to do just that. For financial services, operating earnings of $68.2 million were down 2.8% from last year's $70.2 million, and combined with the OPCO results, the overall OI margin for the quarter was 25.5%, which compared to the 27.4% recorded last year, which included the legal benefits, this time worth 90 basis points. EPS for the quarter was $4.72, 35 cents below last year. 16 cents from last year's legal payment was included in the 24 number, and this year's level included $0.09% impact from higher pension amortization costs. In other words, there were $0.25% of headwinds in the year-over-year comparison of EPS. So now let's speak about the market. So those are the results, but now let's speak about the market. We believe the automotive repair environment continues to be favorable. We did see mixed but improved results with the technician. The tools group was up low single digits in the U.S. network while the international vans were flat. And from what we're hearing directly from the franchises of the techs, from the grassroots, I believe vehicle repair emphatically remains a very favorable place to operate, and the industry metrics continue to confirm that view. Miles driven, average vehicle age, household spend on repairs, tech town and tech wages, they're all up. Now, the macro environment is still turbulent, but the tech uncertainty has stabilized and having said that it remains significant in all that however the the tools group pivot does appear to be gaining traction and overcoming the ants thanks you can see it in our second quarter results we like the way the numbers are moving it's a positive sign on the other side of auto repair where repair systems and information the RS&I group is displaying encouraging progress expanding snap-ons presence with repair shop owners and managers with particular strength in OEM dealerships, things are looking okay. Upgrading facilities and equipment, you know, the OEM dealerships upgraded facilities and equipment to match the growing complexity of the new models. Now, there are pockets of hesitation on garage projects, with some independent shops thinking that delay and the turbulence is the right move. But in general, the shops know that deeper complexity is rolling, and the challenges are coming, and they must be ready. So in general, the FedEx went to remain strong, and you can see it all over the RS&I results. And for the critical industries. Now here, we saw uncertainty and hesitation early in the period. Liberation Day and the weeks that followed create a lot of windage in project planning and execution. Many businesses adopted a wait-and-see approach, waiting to let the trade program develop before pulling the trigger. And we did see postponements. The quarter progressed, however. The initial shock gave way to what I would call accommodation. Project flow came back, and our order book has grown. So the critical industries built momentum through the quarter, and they remain a very attractive place to operate, despite what we believe may have been a shock blip in the quarter. So overall, I describe our markets as continuing to offer opportunities that we believe display momentum. Challenges do exist. There are headwinds. But we're confident with our advantages in strengthening product lives that solve critical tasks. In our extraordinary brand that marks the serious, the critical, and the professional. In our very experienced team that's capable, committed, and battle-tested, we'll prevail against the difficulties and continue moving positively. So now let's move to the segment. The commercial and industrial group was the place most impacted by the shock early in the quarter. You know, it has the largest international presence, and its critical industry division has a substantial slice of project business. So the group's second quarter as reported volume decreased 6.5%, including $4.5 million in favorable foreign currency translation, and an organic sales decline of 7.6%. C&I's operating income was $46.9 million, below 2024 levels by $15.3 million. Operating margin was 13.5%, down 320 basis points. But we did see upward motion as the quarter progressed, as the customers accommodated to the environment. So we're confident in and committed to extending in the critical industries, and we'll keep strengthening our position with CNI as we move forward, observing the tasks, using the insights created to create products that make work easier. A great example is the next generation, the next generation, quarter-inch drive, 14.4-volt cordless ratchets, increased power and speed, 40 foot-pounds of torque for breaking loose, stubborn fasteners. And once freed, the tools 400 RPMs kick in and the fasteners fly off. It's a real time saver. Our Mersey, North Carolina plant just released two models, a CTRA25 offering a compact frame and a CTRA27 with an extended neck, two tools to maximize efficiency when techs are working at hard-to-reach, out-of-the-way applications. And there are other great features of the tools. The brushless motors provide improved durability and longer run time. The variable speed trigger gives the tech more control, preventing, you know, in this situation, that over-tightening that can damage components. And our ring of fire creates 360 degrees of daylight, beaming from six LEDs generating 27 lumens, illuminating even a cavernous workplace. All of this serving to make work much easier. The CTRE25 and 827 compact frame and long neck designs, techs love them. They know they need both of them. And based on a strong recession, it's now clear they're destined for our million-dollar hit product list. Especially torque business remains red hot. It actually had a strong quarter. Part of the reason is that our lineup continues to expand, moving to meet the increasing and complex challenges of essential bolting and tensioning. And recently, we introduced the new CTM-550 unit, so it joined our growing array of cordless torque multipliers. This tool is 66% lighter and 20% smaller than its big brother, the 1-inch CTM-800. And it effortlessly delivers torque all the way from 160 foot-pounds to 550 foot-pounds. It's ideal for tackling a range of tasks and a growing number of heavy-duty applications The new tool enables much greater efficiency and comfort, and it replaces the commonly used impact gun and torque wrench combinations with a single tool, eliminating several more ergonomic paths to repair. It's a design that combines the efficiency of our extraordinary Norbert gear designs with the brushless motors of our power tools operation to make problem torque, to make precision torque at high output a breeze. And, you know, a fine advanced cooling system, no pun intended, means extended use and increased durability. The CTM also has multiple connection options, enabling the accuracy of the procedure to be documented and reviewed, ensuring that the job was done correctly and that the bus or semi-truck or bulldozer will operate as designed, and CTM-550. Sophisticated, powerful, versatile, with the durability to tackle the harshest environments, servicing the needs of the critical, and as you might imagine, it's been well received. Does it make critical work easier? Financial networks achieved against the win. Technicians are still cash-rich, but confidence-poor, and they're still hesitant to tie themselves to long-term obligations. Originations were down 4.9%. Sales items like large storage boxes decreased in the quarter, but our connection with grassroots customers indicate that the uncertainty is stabilized. And over the period, the tools group pivoted to faster payback items, gained traction against the continuing wars, the rapid-fire announcements in the capital, and the threats of inflation. All through the quarter, we kept working. Shift in production, refocusing marketing and promotional campaigns, and most important of all, introducing innovative new products that make an immediate impact, offerings that created a short-term payback. So for tech servicing vehicles of growing complexity, access is big.

They need help reaching, squeezing, contorting their way into compact areas,

trying to make repairs without dismantling things like parts, components like fenders or grills or dashboards. Every day we're there in the garage observing these tasks, developing the solutions that make the work easier and more profitable. It's Snap-on's principal value-creating mechanism. Well, during the quarter, the Tools Group launched a number of new products, each delivering unparalleled access and matching the customer's preference for faster paybacks. One is the SGA S102, a two-piece radiator pick set. Each unit is seven inches from handle to the tip and offers a unique design. One is hook-shaped, ideal for pulling hoses away, and the other is straight, perfect for pushing the coolant lines free. The complete set is built in our Elkmont, Alabama facility, and, you know, it might seem trivial. But I assure you, modern vehicle engine bays are jam-packed. Hoses are no longer out in the open. And now, even basic repairs, more often than not, require removing fan shrouds or a range of other parts. But with these tools, a tech can extract the hose with ease. Conventional setups have similar geometries, but they require much more space to function. Our new picks get great access, and they do save a lot of time, and the techs have noticed. Another quick payback is our FKC72, a 3-inch-inch drive, stubby-length hand ratchet, produced in our Elizabethan, Tennessee plant. It's our smallest 3-inch-inch ratchet ever. I mean, it's time. The length of your pinky is in a car. Well, this stubby can go wherever your fingers can reach. But even though it's small, it offers great strength, courtesy of Snap-On's unique dual-pawl system. And the 72-tooth design enables a five-degree swing arc, another access enabler. And the sealed head increases reliability, keeping the debris that can muck up the works from entering the gear mechanism. It's another Snap-On must-have for serious checks, and it helps drive the pivot in the quarter. And perhaps best of all, just released the redesigned 15-inch extra-long needle-nose plier set at our Milwaukee plant. Now, that's a process that's difficult to master, but if you get it right, and Milwaukee's one of the few who can, it results in greater strength and delivers tighter tolerances without additional and more costly machining. The long plier neck reaches through restricted openings, creating access, and the cold forking process and the associated shaft strength enabled 85% more gripping power than other models. And that makes this tool a real time saver. I mean, if you drop a part in a recessed area, no need to disassemble the workpiece. These units will navigate through the confined space and they'll grab the lost component without letting go, making sure and quick retrieval. That's a great and significant advantage. Each of these new products make work easier and repairs faster. And all three have already achieved what we call our $1 million hit product status. And meeting the tech, and last quarter we talked about this, about the bottom end of the bigger ticket items. After meeting the tech's, and meeting the tech's preference for faster payback tool storage, our plant in Algona, Iowa, released a special offering of entry-level KRA 2422 Classic Series Roll Cap. Back to 55 inches wide, built from a one-piece welded body, with reinforced corners and a 14-gauge steel bottom panel that supports a payload of 2,400 pounds, over a ton of tools. It's ideal for organizing a tech's investments with two drawers spanning 50 inches wide, one 5-inch deep for deep sockets, and a 3-inch drawer for storing long ply bars and extensions. The box is functional, rugged, and it's relatively economical. But what will get your attention in this array is the array of eye-pop and two-tone paint schemes. One, a black case with extreme green doors and black trim is my personal favorite. I can tell you, it is bright. Any tech would stand out with this beaming box in this space. Series just came out, and it's already had significant demand. So that's the tools group. Gaining on uncertainty. Back to growth. Exiting in the quarter with momentum, and great American-made products were the big drivers. Sales in the second quarter were $468.6 million, with an organic gain of 2.3%, a high single-digit advancement in diagnostics and information, and strong double-digit improvements in our OEM businesses. Operating earnings for RS&I were $119.8 million, up $6.2 million, or 5.5%, And the operating margin of 25.6% was 60 basis points better than 2024. Now, just a little fun fact. The OI margin has increased year over year of the last 13 quarters. Sixth Street. That's the rise of software and the power of RCI. Shines through the turbulence, leveraging our customer connection, and launching innovative products. One example is Triton. Born in our San Jose facility, positioned in the middle of our intelligent diagnostics offering, Triton provides a wireless connection between the car and the handheld. Techs can move freely around the bay, under the car, inspecting, troubleshooting, and testing without restraint. And, this is important, it does that without losing the lightning speed that's the hallmark of our wired units. This two-channel lab scope now provides zoom capability, and this is crucial. When waveform glitches happen in a blink of an eye, as they often do, they're hard to catch on a standard unit. So Triton customers can now record, play back the test, magnify the pattern, zero in on the abnormally, and identify intermittent problems. The Triton thing, it's flexibility, speed, zoom capability, eight-hour battery life for extended use, and four times the memory, handling more procedures and data, handling more procedures and data than ever. The launch easily exceeded prior releases. As you might expect, this gangbusters platform is a clear winner in the shops.

Arseneye is on a roll.

Great diagnostic units, powerful databases, Mitchell Pro-Demand repair information, the proprietary power of intelligent diagnostics, effective shop management systems, continuing upward progress, driven by great hardware, significant advantage of the software, and a dedication to RCI. We're going to keep driving to expand our size position. We're repair shop owners and managers, offering more new products developed by our value creation process, and we're confident it's a winning formula. By both challenge and advancement. C&I down, impacted by the shock of Liberation Day and a bout of wait and see, but some recovery is underway as a payback. 1.6% organically. OI margin, 23.8%. Flat to last year, but representing the third highest in the group's history against the wins. Sales up 2.2%, OI margin 25.6%, up 60 basis points. Software rising and RCI delivering again. It all came together for overall sales of $1,179.4 million. Flat, gross margins 50.5%, down 10 basis points. unfavorable currency transaction and the impact of volatile trade policy balanced by RCI and OI margins of 22% down 80 basis points adjusting for last year's legal benefit primarily reflecting the conviction to keep investing in product and brand and people demonstrating operational strength all achieved in difficult conditions

encouraging quarter

Now I'll turn the call over to Aldo.

Thanks, Nick. Our consolidated operating results for the second quarter are summarized on slide 6. Net sales of $1,179.4 million in the quarter were unchanged from last year, reflecting an $8.6 million organic sales decline that were currency translations. Sales in our automotive repair markets were up, with gains both in our franchise van channel and in activity with OEM dealership and independent repair shop owners and managers. Within the industrial sector, reflecting the economic and geopolitical uncertainty that occurred throughout the period, 50.5% compared to 50.6% last year, and included 50 basis points of the effects, partially offset by benefits from the company's RCI initiatives. ...advantaged in the current tariff environment, manufacturing products in the markets where they are sold. Our costs can be affected by mitigating the effects of incremental tariffs, managing material and other costs so that there was no meaningful impact on gross margins. With respect to the unfavorable foreign currency effects in the quarter, much of this was due to transaction impacts of the year-over-year strengthening of the Swedish krona versus the euro and the U.S. dollar, as we have factories with C&I and RS&I groups. In C&I, we manufacture cutting tools for our European and emerging markets, while in the RS&I, our car liner facility produces collision products that are percentage of net sales 26.8% in 2024, mostly due to a non-recurring benefit of $11.2 million from legal payments received last year and increased personnel and other costs, including ongoing brand investments. Operating earnings before financial services of $259.1 million in the quarter compared to $280.3 million in 2024. As a percentage of net sales, operating margin before financial services of 22% compared to 23.8% reported last year, which included a benefit of 100 basis points from the legal payments. Financial services revenue of $101.7 million in the second quarter compared to $100.5 million last year, while operating earnings of $68.2 million compared to $70.2 million in 2024. four. Consolidated operating earnings of 327.3 million compared to 350.5. As a percentage of revenues, the operating earnings margin of 25.5% compared to 27.4% in 2024, again, including a benefit from the legal payments. Our second quarter effective income tax rate in 2025 and 22.6% in 2024. Net earnings of $250.3 million compared to $271.2 million in 2024. And net earnings per diluted share of $4.72 in the quarter compared to $5.07 per diluted share last year. When comparing the quarter's earnings per share with the second quarter of the prior year, there is $0.25 per share of headwinds on a year-over-year basis, approximately $0.09 per share of increased year-over-year, non-service, and net periodic pension amortization of actuarial losses, while the second quarter of 2024 included $0.16 from the legal payment. And I group on slides up $8 million compared to $372 million last year, reflecting a 7.6% organic sales million dollars of favorable foreign currency translation. The organic reduction includes double-digit decreases in the segment's Asia-Pacific and European-based handful businesses, like the reduction in certain cross-border sourcing activities and the current trade situation, and the slowdown of projects by our customers in some industries and geographies, including U.S. aviation and the military. With respect to critical industries, demand was challenged in April but improved as we moved through the quarter. Gross margin of 40% in the second quarter compared to 41.7% in 2024. This decline was primarily due to lower sales volumes, favorable for the percentage of sales of 26.5% in the quarter compared to 25%, largely reflecting the impact of reduced sales volumes as well as increased personnel and other costs. Operating earnings for the CNI segment of $46.9 million compared to $62.2 million last year. The operating margin of 13.5% compared to 16.7% in 2024. Turning now to slide eight, sales in the Snap-on Tools Group of $491 million compared to $482 million a year ago, reflecting a 1.6% organic gain and a $1.2 million of favorable foreign currency translation. The organic increase reflects a low single-digit rise in the United States business, while activity in our international operations was essentially flat. we believe are successful in overcoming the continuing uncertainty of technician customers in the current environment. Gross margin declined 50 basis points to 48.3% in the quarter from 48.8% last year, mostly due to 40 basis points of unfavorable foreign currency effects. Operating expenses as a percentage of sales improved 50 basis points to 24.5% in the quarter from 25% in 2024, largely reflecting the higher sales volumes. Operating earnings for the Snap-on Tools Group of $116.7 million compared to $114.8 million last year. The operating margin of 23.8% was unchanged from 2024. Turning to the RS&I Group, shown on slide 9, $18.6 million compared to $454.8 million in 2024, reflecting a 2.3% organic sales increase and $3.1 million of favorable foreign currency translation. The organic gain includes a double-digit increase in activity with OEM dealerships and a high single-digit gain in sales of diagnostics and repair information products to independent repair shop owners and managers. These gains more than offset a high single-digit decline in sales of undercar equipment, including collision repair products. 30 basis points to 46.8% from 45.5% increased sales of higher gross margin products and benefits from RCI initiatives, points of unfavorable operating expenses as a percentage of sales rose 70 basis points to 21.2% and 20.5% in 2024, largely due to increased personnel and other costs. Operating earnings for the R&I group of $119.8 million compared to $113.6 million last year. The operating margin improved 60 basis points to 25.6% from 25% reported in 2024. Now turning to slide 10, services of $101.7 million reflected an increase of $1.2 million from $100.5 million last year. Financial services operating earnings of $68.2 million compared to $70.2 million in 2024. Financial services expenses of $33.5.3 million last year. The increase is primarily due to $1.5 million of higher provisions for credit. Percentage of the average financial services portfolio expenses were 1.3% in the second quarter of 2025. Average yields on finance receivables were 17.5% and 17.7%, while the average yields on contract receivables were 9.1% and 8.9% respect. Originations of $293 million in the second quarter represented a decrease of $15.1 million, or 4.9% from 2024 levels, including a 5% decline in extended credit originations. The reduction in extended credit originations mostly reflects lower sales of discretionary big-ticket items such as tool storage units, partially offset by higher originations associated with the successful launch of the new Triton Diagnostics platform. Moving to slide 11, our quarter-end balance sheet includes approximately $2.5 billion of gross financing receivables and $2.2 billion from our U.S. operation. For extended credit or finance receivables, the U.S. 60-day plus delinquency rate of 1.8% is up 20 basis points from the second quarter of 2024, but down 20 basis points from the rate reported last quarter. Trailing 12-month net losses for the overall extended credit portfolio of $69.5 million represented 3.46% of outstanding at quarter end. We believe these portfolio performance metrics remain relatively balanced. Now turning to slide 12, cash provided by operating activities of $237.2 million in the quarter compared to $301.1 million last year. The lower cash flow generation as compared to the second quarter of 2024 largely reflects higher year-over-year increases in working investment and lower net earnings. Net cash used by investing activities of $46 million mostly reflected net additions to finance receivables of $26.4 million and capital expenditures of $19.7 million. Net cash used by financing activities of $170.9 million included cash dividends of $111.8 million and the repurchase of 250,000 shares of common stock for $79 million under our existing share repurchase program. We had remaining availability to report $0.9 million of common existing authorizations of $26.8 million from 2024 year end. Today's sales outstanding of 65 days were down one day sequentially from last quarter, and compared to 62 days at year-end 2024. Inventories increased by $54.3 million from 2024 year-end, primarily due to $37.4 million of currency translation and some investment intended to mitigate supply returns of 2.0. Year-end cash position of $1,458.3 million, compared to $1,360.5 million at year-end 2024. In addition to our existing capital operations, we have more than $900 million available, and so I'll now review a few outlook items for the balance of the year. We believe that expenses for the remainder of 2025 will approximate $27 million per quarter. In 2025, as previously shared, we recognize and expect to continue to incur approximately $6 million pre-tax per quarter of increased non-service pension costs, largely due to higher amortization of actuary losses. These non-cash costs are recorded below operating earnings as part of other income and expense net on our statement of earnings, and we'll have about a $0.09 per diluted share quarterly negative effect on EPS for the balance of 2025. Expenditures will approximate $100 million, and we currently anticipate that our full year 2025 effective income tax rate will be in a range of 22% to 23%. Our expected range, which factors in the U.S. tax bill that was recently passed, is unchanged from previous years. In 2025, our fiscal year will contain 53 weeks. It has not had a significant effect.

Marked by resilience, portfolio balance, shock, accommodation, C&I. International markets and critical industries disrupted by Liberation Day. The shock giving way to accommodation in the storm. Continuing uncertainty. The pivot, gaining some traction. Sales up 1.6% organically. U.S. up. International flat. A return to positive. OI margins, 23.8%. Flat to last year, but among the group's strongest ever. RS&I, continuing strength, sales up 2.3% organically, OPCO OI margin of 25.6%, up 60 basis points, rising again. It all came together for an overall demonstration of performance against turbulence. Sales for the corporation were $1 billion, $179.4 million, essentially flat in the difficulty. Opco OI margin, 22%, down 80 basis points, adjusting for last year's legal benefit, with a gap driven primarily by spending to maintain full strength, preserving advantage for when the turbulence abates. And EPS, $4.72, comparisons against 25 cents of headwinds. We believe that these results demonstrate our overall strength. They also highlight our relative advantage in the turbulence of the volatile trade policy, strengths rooted in our strategy of making in the markets where we sell, and in our solid structure of broadly-based facilities, 36 factories, 15 in the U.S., and in the considerable distributed know-how. We make a version of our products in almost every region, but especially in the U.S. We believe this advantage is clearly on display in our quarter's gross margin of 50.5%, down 10 basis points from last year, but a shortfall more than explained by 50 basis points of unfavorable currency that was offset by RCI. We said we believe we're resistant to tariffs, and we meant it. We further believe that as we move forward, we have momentum as the shock receives, and we have advantage rooted deeply in our products, continually matching the increases in complexity of work, making it much easier. Advantage in our brand that really does mark the professional and displays personal and collective pride and dignity. And, of course, advantage in our people, dedicated, capable, battle-tested, and wielding the Snap-on Valley creation processes to approve every day

as they demonstrated in the quarter.

So we believe that as we move forward using those strengths inherent in our enterprise, we'll prevail against the difficulty, execute on our abundant opportunities, and move positively through the last half of 2025 and well beyond. Before I turn the call over to the operator, I'll speak directly to our associates and franchisees.

I know many are listening.

I know that the encouraging results we just discussed was created by your efforts, past and present. In progress against the turbulence, you have my congratulations. For the energy you bring to our enterprise every day, you have my admiration. And for your confident and unweathering commitment to our future, you have my thanks. Now I'll turn the call over to the operator. Operator?

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. And at this time, we'll pause momentarily to assemble a roster. And the first question will come from Luke Young with Baird. Please go ahead, sir.

Good morning. Thanks for taking the questions, Nick. I want to start just with the big shift we're seeing in the Tools Group 1Q into 2Q. I guess with the benefit of hindsight, is there anything that sticks out to you as, I guess what I'd say, less normal in the first quarter in the Tools Group, or maybe particular areas where you may have gotten caught a little bit fat-footed in this environment, I guess thinking through the lens of 2Q now that feels a lot more normal in terms of the company's ability to navigate this turbulence. Just, you know, what was, do you think, the most important area of internal execution this quarter, and should we think you can lean into that even more into the back half of the year?

Well, I think part of it was I think the technicians, I think you saw, I think there was some evidence that the technicians had more uncertainty, accelerating uncertainty in the first quarter versus prior quarters. You saw consumer sentiment drop from December to January by, I think it was 20 points. You know, problem. Still down, but it rebounded a little bit. I would say that the early days of the administration spooked the grassroots. Pivoting was going better. you know, was going, but that spooking, that 20 basis, reflected in the 20 basis points, and I don't mean to tie it exactly to that, really outran the pivot so much by tariffs. You know, Liberation Day didn't affect them so much. So they're more sitting there, and not much happens, really, in the last, I guess, the bombing of Iran happened, but that's not so much, and we started to gain ground on that. That's what happened. I guess the one learning we learned in the first quarter that we applied in the second quarter, You might remember that I talked in the first quarter about I think we can nibble into the lower end of the big-ticket items like we're economical. And so we did some more of that in the second quarter. I talked about it on the call, the classic series, you know, the other series, these eye-popping colors. That was pretty popular. So I think we learned we can add to the pivoting to what the obvious things are like hand tools and power tools and other stuff like that. sort of eating at the bottom end of the big line and focusing on that. And I think that's one of the things we did. I'm not sure that keeps working because you always have to do some different things. But I think the pivot is now working pretty well. And I think we have momentum. I've said this in this thing. We exited the quarter stronger than when we entered.

What about the origination side of things, Nick, and just generating demand for new credit? You mentioned in your script the benefit of diagnostic units that we're seeing in that originations decline moderating sequentially, but do you think there's an opportunity to get franchisees to lean into credit a little bit more as we go through the back half of the year?

No, your gift's as good as mine. I don't know. You know what I mean? Look, I think this. Originations were better. You know, for government work, we're down half as much as we were in the first quarter. I think we're down more. This quarter, we're down 4.8%, 4.9% originations, and certainly the originations were somewhat plumped up by the launch of the Triton, so tool storage was probably down more than that would indicate, but I don't know how that goes forward. I think it's going to take a while for customers to kind of accommodate. But as we saw in the pandemic, which is really, I'm kind of talking about that with the CNI shock question. It's kind of like a pandemic event. Everybody got shocked. I think the technicians have been shocked for a while. I think sooner or later when nothing new happens, they start to accommodate, and they start to realize, well, you know, I'm worried, but nothing's really happened to me. My wages keep going up and I start to say I can take a few, I can tie myself to more normal situations. So I would expect that to get better as we go forward. Plus, I do think we're better at the pivot. We're getting better and better and better and better and better. So that works for us. I don't know if I need the originations to come back right away. I do think that eventually people, if nothing big happens, they start to stabilize even more and people start to come back with rejoices. but I'm not predicting anything like for the next quarter. As you know, Luke, I'm going to say this again because I said it at every third quarter. The third quarter is always scorely. Harder to predict than anything because the SFC is during that quarter, and that creates a kind of turbulence that you can never predict. So we'll see how close. But I like the way things are going, I'll tell you that. You can see it in the numbers.

Maybe before I turn it back, Aldo, So could you just give us maybe a feel for some of the key end market trends within critical industries in C&I? And, you know, it was mentioned that momentum was much better exiting the quarter relative to, you know, this more COVID-like shock. Can you just give us a feel for, you know, where that runway was directionally relative to getting closer to the plant?

And we saw the biggest change in the Asian and military-related.

I'll leave it there. Thank you.

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

Good morning, all. Did you call out what the FX impact on earnings per share was for the quarter in your narrative?

I did not. Would you like to know?

Yes, I would.

Okay, six cents.

Six cents.

Negative.

Okay, six cents negative. Okay, great. Then a couple of questions here. The RS&I growth was pretty strong, and you mentioned something about our new Triton platform. Could you maybe elaborate on that and what the price points are and what are the differences with this platform versus what you had in the market before?

Sure. Look, Gary, I don't know if I can say the price point on it. Yeah, okay, let's say $4,500, ballpark. ballpark $4,500. I don't know how we can afford to sell it for that number, but okay. Around that number. It depends. There's a lot of fact in what it is. Let's say $4,500 to $5,000, something like that. It's in the middle of the intelligence diagnostic range. It's right below Zeus and above Apollo. The differences are that it's wireless rather than wired. The big deal here is that their hallmark was they were like lightning. You plug them in, you started them up, and they really rolled up. This one comes up right away, and it's wireless. Both the flexibility of wireless and the speed, the instant on. Then you have the other thing that we have a zoom feature on. These things have two-channel scope, so what you do is you put the scope on a car and you watch a waveform there. But the thing is, sometimes you can't really see them on the way until you zoom right in and look at small glitches. And the zoom feature allows you to freeze it and move it in. So then you're in Connecticut and Atlanta having dinner with a bunch of these guys. And, you know, they're all, the franchisees are pretty positive, and they love this. We feel pretty good about it. Sold pretty well for, you know, the launch, so we'll see how it goes. We like it, though. So, I mean, it's having an impact.

Yeah, that's good to hear. And then just lastly, in the C&I group, I think you called out that the international operations, you know, were sluggish. Did the U.S. kind of mimic that? You know, I'm not sure how much you do in U.S. and C&I, but I'm trying to get an idea.

Yeah, the C&I roughly, for government work, Gary, the C&I is 50-50. 50 in North America, 50 outside the United States. You know, Europe, you know, well, you know, Asia, we ourselves said we're not importing anything from China. The thing is, there's 170% tariffs. Remember when there were 170%? We just said no. So Asia is very, very discombobulated in this situation, not to mention you've got some other markets disturbed, you know, like South Korea, they just arrested the old president, you know, and everybody's moaning. And then in Thailand, they just declared the new prime minister a traitor and took her out of office. So things are pretty turbulent in Asia. I was just there, and the markets are pretty bad. You look at Europe. I mean, Europe is, again, a cross-border position. They've got GDP in the U.K. was 0.1%, GDP in Germany, 0.3%, GDP in Spain, 0.5%. Europe has got problems. At least for us, we're seeing that. And then in the United States, really what happens to the European businesses and the Asian businesses, a lion's share of which is in that pick-and-ship business, which quick, you know, it's off the shelf, like local project business. Three times for China in a month, they come out with 46% for Vietnam, and then they say, oh, never mind, it's going to go to 10% until July 9th. And then July 9th, they come out and say, well, it's 40% and 20%, but we're not sure, because the 20% is for direct, you know, the standard stuff, and 40% if you have transshipments. So people are sitting there saying it's a very interesting phenomenon. It's a little bit like the pandemic, I would say. It's kind of not congruent to the pandemic, but it's similar. When you're thinking about doing things, you're saying, so that means that put people back, particularly in the early parts of the, you know, and people just said, geez, I don't want to commit. I look like a fool if I make a mistake. So you saw some of that working through the system, especially in a project that kept getting stronger. People just didn't pull the trigger for delivery. And so we like the order book. It's just that, you know, people have to figure out how they're going to accommodate the tariffs, and people are gradually coming, as they did with the pandemic. That's what happened to the pandemic. At first, people panicked, and then everything started to work out, just so you can see in the pandemic.

Thank you very much for that.

The next question will come from Christopher Glenn with Oppenheimer. Please go ahead.

Thanks. Yeah, a lot on that last topic, but just maybe a little follow-up. You know, description of upward motion through the quarter seemed to center a little bit on critical industries and U.S. project timing, but I think you said it really spanned APEC and Europe. So I just wanted to clarify if that motion really spanned all those categories.

No, what I was talking about, maybe a little bit in Europe, you know. Asia is kind of a different deal. Asia is going to take a lot longer to deal with, I think, because, you know, you've got those, just what I said. I mean, you know, they've got the political turbulences in a bunch of different places. And you've got China, which is a basket case. stuff in Asia, and on top of which, you've got the cross-border flows, which everybody's trying to figure out what to do, including us. You know, we're not taking tariffs, but we've got to figure out what to do with our plants in China, you know, if we don't want to use them in the United States, and we sell in Asia, you know, so we've got to just, you know, help them a little bit, but I don't think that gets solved just by the Liberation Day situation. Europe is more like that, but I really was talking about, mostly just in our last, you You know, discussion really about the critical industry's business and their project-based businesses. That's what I was talking about. When we talk about, Chris, when we say that when we enter, we kind of mean, you know, we mean, and if I do mean it, but in C&I, it's most pronounced in the industrial business, which is a HUNA engine in the C&I business.

Perfect. Thanks. Very clear. And then just wondering about capital. You've got a nice net cash position here. Any comments on state of the acquisition pipeline, an update on types of focus that inorganic biz development efforts are taking lately?

I mean, you know, I think you can, you know, it's no secret that we have a pretty large, you know, landscape of acquisitions that we look at, you know, constantly. And, you know, generally there's not much to acquire around the tools group. probably you don't look so much at Asia these days because who the heck knows what's going to happen there, you know. And so you're talking about the expanding the repair shop owners and managers or extending the critical industries. Those are the areas you look in, more or less. And we're looking at, you know, several places. You know, sometimes as we peel the onion, it looks like, hey, these guys are only 20 or 30% off and we don't like the other stuff sometimes. And in this situation, of course, you want to be pretty careful. You don't want to acquire something and wake up and figure out, whoa, you know, the tariffs aren't looking so good for these guys. You know, so you want to be more careful and due diligence. I'm not saying – I'm not giving any future view of that. That's just a little color. So in this situation, I think, you might be able to get bargains, but you're worried about what you might buy, you know. And so you want to be very careful and due diligence. And we are. We take care of our money.

Great, and then SOT, so it sounds like the sentiment moved off the bottom, a little reconciliation in the mindsets there and escalating of your pivot work going well. I just wanted to see if any other factors layered in, you know, what's sell-in versus sell-through, and, you know, is there any restock or maybe price-related pull forward that came to bear?

I don't think there's any of that. Actually, our prices were pretty normal. You know, we might have had a little more pricing in Canada than normal, maybe, you know, because of the situation there. We can always price if we have tariff problems, you know. But generally, we're resistant to that stuff. You might see some of that in Canada. And Canada actually was okay in a quarter, so that wasn't afflicted. I don't think – I think you saw it. I mean, I think the international business is kind of mixed. And so that was flat. I think the big news is U.S. up. And that was driven by the pivot. The hand tools were pretty successful, huh? And things made, and I think, you know, we felt, you know, if you look at the structure of the quarter for the tools group, we exited strong, simply it. That's no prediction. I've already said that the third quarter is squirrely, you know. But generally, I like the direction we're going there. It seems like, and I think it's simple as this. We've been pivoting. or getting better at it, it destabilizes every month we gain ground on it with the pivot, every month.

Thanks for all that. The next question will come from Scott Stember with Roth. Please go ahead.

Good morning, and thanks for taking my questions as well. Good morning, Pat. Just to clarify, I guess there was a question about maybe sell-in versus sell-through, if I thought I heard correctly. But could you talk about tools? I know there's a lot of new products that are out, but sell into the channel versus sell off the van in the quarter.

It's tough to get through the van, so therefore you would have that kind of an effect naturally. Generally, we haven't seen all these turbulence really. It's a kind of blip in that kind of view. You know what I mean? It depends on what's launched. School numbers are a little lower.

Got it. And then you talked about some of these higher ticket items or less expensive higher-ticket category sales that you're seeing. The leader.

See, it doesn't mean much to, you know, if you're like us, you know, like me anyway, who pushes a pencil all the time, but it's important to the techs, and they're liking some of the stuff we're bringing out. Now, diagnostics did pretty well. Don't get me wrong. The Triton was stupendous, but full storage is down, you know, and stuff like that. Now, every quarter there's a new story about the products. I think generally, though, the big thing is the overall number. And I don't want to get off the call without reemphasizing what we think is the bellwether number, and that is 50.5% gross margin, down only 10 basis points, against 50 basis points of negative currency transactions. Think about that one for a minute. And you see that, boy, that just lays out what we're doing. We're doing okay. We're winning the battle at the point of sale. But since sales are a little, you know, we're still spending more because we want to keep building our advantage in product and branding people. We're hiring more engineers than ours and I. No kidding. There are margins of about 12 in the last 13 quarters.

And just last question on tariffs. Nice job on, you know, essentially mitigating everything in the quarter. But could you dimensionalize what the headwind was and as more tariffs start flowing through, you know, how much bigger that can get in the back half of the year?

You know, I swore I was not going to do that because I think, no, I'm not going to do that. I just, you know, it's hard for me. You know, we can make changes every day and mitigate. And the thing is, every day something new comes up. I got somebody's got on what comes out of Washington, and we have to review it because the tariffs are always changing. Your guess is mine. So we have to move with alacrity against it. So it's impossible to predict. And all I can tell you is I like our position versus any of that stuff. Our position is pretty good. We make in the markets where we sell. Well, now we do have some exposures, but we know how to make everything, almost everything.

That's all I have.

The next question will come from David McGregor with Longbow Research. Please go ahead.

Good morning, everyone.

Congrats on the progress, Nick. Hey, good morning.

I guess just on the C&I business, you talked about the project delays and how that led to some order backlog. Just talk about the timing of that, the realizations there. Are those projects that now that people maybe are feeling a little more, I don't know how much more confident, but maybe a little more confident that we see those projects fulfill here in the second half, or is this just kind of an indefinite push-out?

No, no. Look, I think this. I think, you know, it's hard to get everything in, all the nuances. But in reality, I was talking about delays. You know, people didn't pull the trigger. And I'm also talking about the orders impacting us, kept going and doing well, you know, on delays and projects we expected to go. I don't know about that. I do think things when we entered, and that's, I guess, the slow, you know, it's hard for me. But what happens is, what happens in a pandemic, and I think this is very similar, you know, thinking people start to look at it and they start to be comfortable with the environment and they start to figure out how to just deal with it. It's sort of like all of us in business. Like you know, you know, things start to happen and, you know, the waves are going up and down and you figure out how to navigate the waves after a while. First you get seasick and then you get used to it and you figure out how to do it. And so I think that's what's going to happen. I think we're sanguine about it, you know, anything like that. And I do think that business is strong, though, anyway. Yeah, it sounds like it.

Let me ask you about the tools business. You know, there's obviously been a lot of moving parts. There's a lot of tumult in that space. But there was a time when you thought that tools was a 4% grower on a long-term basis. Is that a number that you're starting to feel a little more comfortable with is achievable on a sustained basis, or is that still something?

I mean, I know there's ups and downs. And so I do think the tools business sees that kind of thing. And this was kind of a little unusual because you had this uncertainty go. I think there was good reasons for it, though, if you looked at the environment, particularly now. And so I'm pretty confident about the tools business. I think, you know, when I talk to the franchisees, they seem pretty happy. When I talk to the customers, they seem to like our product. You know, and I do think our product is stronger than ever. So I feel okay. I think, you know, we have to keep executing. We have to keep working. I think we're good at it, but we have to keep getting better at it. But I have no doubt it's still going to go upwards.

Let me just go back to a previous question about, you know, cash and capital allocation. And you talked about, you know, the M&A funnel looked good. But historically, you know, you've been, I mean, you've done smaller transactions. You've snap on and stayed away from large acquisitions. You've got a net cash balance sheet, you've got strong free cash flow prospects, maybe a billion dollars annually. You just completed a large capacity build-out program. You're not a particularly large share repurchaser, although maybe that changes here going forward. Would you consider a special dividend or a tender offer for shares, or is there a possibility we'll see larger acquisitions? How do you put the cash to work, Nick?

Look, I think, well, I still think we're not in a certain environment, and so I don't mind having cash. You know, I don't mind having it. I mean, I do think I have confidence in the future, but I still don't. And I do believe, I know we do believe we at one of these points will find a big acquisition. We just think it's a matter of time. Now, I've been here a long time. We haven't found one because everything we looked at has been a little bit flawed. But we're not afraid to acquire anything big. Our management team is quite capable. The only thing is, I'm telling you, we won't acquire anything that's transformative. It will require things that's consistent with our coherent growth model. And we do think there are things out there that became available that just haven't been available. So I don't see any big thing now. Now, having said that, we always review on a periodic basis, and, you know, more than once a year, you know, regularly, we review the capital, you know, allocation process. But right now I don't see us contemplating any of those things. But we'll see. You never know.

Good.

That's it for me. Thanks very much. The next question will come from Brett Jordan with Jeffries. Please go ahead. Hey, good morning, guys.

Collision segment, I think you sort of called out that it remains weak. Is that a structural problem or is that a cyclical problem? Is there lower demand for repair with ADAS?

I think, though, that collision might come under the groove. You know, as you're Mr. Collision, you know this probably better than I do. You know, but building up. And our view of the world is they got a little spooked for maybe a variety of reasons they're not investing as much as they used to. That's our view of the world. And so that may be true or not, but that's what our grassroots kind of says, you know. And so we kind of believe that's a fact. Collision, that's a big factor, I think, that's changing that collision, making it a little more tepid. Now, it has been incandescent for a long time, as you probably know. There was a lot of movement. And maybe you're talking about people not so much spooked as saying, okay, I'm going to consolidate. I'm going to, you know, consolidate my gains for a while and then start to move on. We'll see what happens.

And then a question, I guess, as far as the franchise event outlook. I mean, obviously a slightly harder comparison on Q3 against a pretty strong franchise event last year. You know, any color as far as, like, what the attendance is looking like?

I mean, it's in Orlando, and this year it's in Orlando for a number of reasons. so you never know how that's going to go over. But we expect a pretty robust, you know, as robust as last year looking now. You never know, Brett, until like an annual meeting, a lot of the votes come on, that kind of thing. But I do think it will be pretty robust. Now, having said that, though, the SFC, you know, it's great. You know, you like that. It's always enthusiastic. You can't go away from the SFC without feeling good about Snap-on. But it's only orders, you know. And so whatever happens at the SFC, you've got to realize it's only orders, and therefore it has to play out in real sales. You know, getting high orders are better than getting a stick in the eye, getting a sharp stick in the eye, but they're not definitive. They're not fully definitive. They're just directional.

All right, great. Appreciate it.

This concludes our question and answer session. I would like to turn the conference back over to Ms. Sarah Verbski for any closing remarks. Please go ahead.

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 SnapOn. Good day.

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