Earnings Call Transcript
Snap-on Inc (SNA)
Earnings Call Transcript - SNA Q4 2024
Operator, Operator
Good day and welcome to the Snap-on Incorporated Q4 Full Year 2024 Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Sara Verbsky, Vice President of Investor Relations. Please go ahead.
Sara Verbsky, Vice President of Investor Relations
Thank you, Alan, and good morning, everyone. We appreciate you joining us today as we review Snap-on's fourth quarter and full year 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 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 the transcript of today's call. Any statements made during this call relative to management's expectations, estimates or beliefs or 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?
Nick Pinchuk, CEO
Thanks, Sara. Good morning, everybody. I'll start with the highlights of our fourth quarter. I'll give you my perspective on the results, on the market environment and on our progress. It was considerable. After that, and as usual, Aldo will move into a more detailed review of the financials. These are interesting times, filled with uncertainty. But Snap-on is built to prevail even in turbulence. And this isn't our first rodeo; it's our job to confront and overcome and proceed with confidence. Confidence in the resilience of our market, confidence in the strength of our strategic and tactical advantages, and confidence in the insight and energy of our consistent and capable people. And all of that echoed in the numbers. So here they are. Overall sales in the quarter were $1,198.7 million, up 0.2% both as reported and organically, returning to positive territory. Profitability was strong with a gross margin of 49.7%, a gain of 140 basis points. The OpCo OI margin was 22.1%, an increase of 50 basis points over 2023 and an all-time high for the fourth quarter. Financial services earnings of $66.7 million in the quarter were lower by $1.2 million, leading to a consolidated margin, including both OpCo and financial services at 25.5%, an improvement of 30 basis points. Our EPS for the quarter was $4.82, up $0.07 from the $4.75 recorded last year. The results show broad gains overcoming the uncertainty; another period of sequential progress brought by record performances by both the commercial and industrial group and by the Repair System Information group, combined with the Tools Group successfully pivoting to match tech preferences and continuing to narrow the gap versus last year. It was an encouraging demonstration of advantage, our resilience and capability. But first, let's speak about the markets. We believe the vehicle repair market is robust, with a continuing stream of new tools and data to confront the rising complexity of the modern vehicle. The repair shops today, dealerships or independents, must deal with an expanding array of challenges—multiple powertrains, EVs, plug-in hybrids, super hybrids, advanced combustion, sophisticated digital systems, and a wide range of autonomous operation devices—like adaptive cruise control, lane departure warning, collision avoidance sensors, and self-parking features. It goes on and on, and the list is getting longer. Technicians have to fix it all, addressing a dizzying array of procedures. It's daunting, but this is where Snap-on shines—scanning, diagnosing, guiding and fixing, enabling techs and making the difficult tasks easier. And combined with an aging car park that now averages 12.6 years, including a multitude of technology generations, all needing to be fixed—driving even more complexity and requiring even more tools and data—this represents even more opportunity. We love it. Vehicle repair has several slices. So let's start by focusing on the shops—the dealerships and independent shops—adjusting to complexity, often requiring things like new lifting equipment to handle the increased weight of EVs, tire changes that accommodate larger wheel sizes, software suites for managing the shops, organizing parts data into streamlined catalogs, scheduling repairs, customer interfaces and guiding the techs to the most sophisticated or complicated repairs. This is where RS&I operates. It’s a target-rich environment for our array of undercar and collision equipment, and it’s a growing market for our software and data products. Snap-on is well positioned with our innovative hardware, especially with our proprietary comprehensive database—billions of insightful records—advantages that we believe reinforce our position as the data king in vehicle repair. Now let’s shift to the techs—the individuals working under the hood, twirling the wrenches, hitting the touchscreen, applying their skill and making the repairs. Again, this quarter, I had the opportunity to meet with a number of franchisees and their customers. All expressed their enthusiasm for the strength of vehicle repair, and external data confirms that view: miles driven up, car park age, household spending on auto repair is higher, hours worked increasing, and best of all, tech wages rising. I was recently in a garage and the service manager emphatically proclaimed to me that the work just keeps rolling in. We need more techs. Makes sense; expanding complexity means more time spent on each repair and more trained professionals needed to meet the demand and keep the shops prospering. It’s clear the techs are in a good position. But that doesn’t make them immune to the macro uncertainty around them—ongoing wars, immigration disputes, lingering inflation. Although the election’s in the rear-view mirror and the new team may be more focused on business expansion, there’s a rapid fire of new initiatives, tariff bonds, on-and-off again actions, impending shakeups, and foreign ventures of many varieties. It's hard not to be uncertain about what's coming. The franchisees echo that uncertainty. In the turbulence, technicians continue to prefer quick payback items—ones that make work easier and cut labor times right away—items like hand tools and diagnostic tools that can be paid off in shorter cycles. They remain cool on big-ticket, longer payback items like tool storage. The Tools Group is continuing its pivot, focusing its engineering, manufacturing and selling to match the shift in customer preferences. Despite some challenges, automotive repair remains strong, and we believe we’re pivoting successfully to take greater advantage. Let’s talk about critical industries, where C&I takes Snap-on out of the garage, solving challenges that require precision, durability, reliability, and repeatability—all performed in some of the most demanding and cruel environments—from clean rooms, to mine pits, to assembly lines, to building spacecraft. This market is promising. Our activity in critical industries continued rising across multiple sectors: aviation, natural resources and general industry were all up nicely. The arena also represents our most significant international presence; those markets were mixed—Europe, UK, and Southern Europe up; Germany down; in Asia-Pacific, China weaker, but gains in Japan and South Asia, despite unfavorable currency. I’ll add that to that situation, despite unfavorable currency. C&I has challenges across the geographies and segments, but we have made significant advancements and do see substantial opportunities for tomorrow, leveraging our advantages in product, brand and people. When you see the results, you realize it’s working. Both the auto repair and critical industries markets remain positive, and we’re ready and well-positioned to advance. It’s clear we have potential longer runways for improvement. As we proceed, we’re fortified by our Snap-on value creation process, safety, quality, customer protection, innovation, and rapid continuous improvement—they’ve never been more important, helping us overcome turbulence and author resilience. Customer connection and innovation are our unique advantages, standing side-by-side with working men and women, observing each task, matching insights gained with technology to develop new and innovative products that make work easier. This is a considerable strength, and our team is committed to continue wielding it with determination. Now let’s talk about the operating groups. Let’s start with C&I. Fourth quarter sales of $379.2 million was an all-time high, represented an increase of $15.3 million versus last year and included $2.1 million in acquisition-related sales, $1 million in unfavorable foreign currency, and our organic rise of 3.9% driven by gains with customers in critical industries. Strong sales of our customized kits led the way, meeting the rising demand for solutions that matched specific tasks. Our specialty torque division was also a clear positive. Precision is becoming more essential every day, and our broad torque offering put C&I right on target, clearly reflected in the numbers. OI for C&I was $63.5 million in the quarter, up $9.4 million or 17.4% from 2023. The Group gross margin was up 180 basis points, and the operating margin was 16.7%, also up 180 basis points. C&I just keeps getting better. The specialty torque business is really making strides. Torque is hot now, and Snap-on is at the party with a growing array of new products, including our heavy-duty cordless torque multiplier, the CTM 800, delivering torque from 160-foot pounds up to 800-foot pounds—that’s what’s needed to meet the broad challenges across mining, oil and gas, rail, and heavy duty. It's a tool made possible by our expansion in torque—combining efficiencies of a Norbar gear design with the compact operation of a Snap-on power tool. The new unit is also equipped with a specially designed transducer control for precise force application; a breakthrough benefiting from our advanced power tool cooling system that enhances durability. The CTM 800 torque packs a lot of capabilities into one compact tool: improvements in versatility, safety, access, durability, and precision. It has it all, and in critical tasks, it's already a big hit. C&I’s sales are up, customized kits and precision torque are rising to new levels, with record profitability—a high point profitability, with much more room to grow and improve. Now on to the Tools Group. Quarterly sales of $506.6 million were down but reflect progress in narrowing the gap versus 2023. The progress is evident, but uncertainty still lingers. OI for the Tools Group was $106.9 million, down $4.1 million from 2023, with an operating margin of 21.1%. Despite the turbulence, we remain steadfast in supporting our van network, maintaining its strength, and spending on it. This profitability was regionally acknowledged by multiple publications: The Franchise Business Review recognized us in its latest ranking for franchisee satisfaction, listing Snap-on as a top 50 franchise for the 18th consecutive year. We were named number 1 among all franchisees in Entrepreneur Magazine's 2024 list of top franchises for veterans. Snap-on was ranked by the UK Elite Franchise Magazine as the number 1 franchise in that country, a distinction we've held for three consecutive years. These types of rankings confirm the fundamental strengths of our franchisees individually and of our van business in general. This achievement would not have been possible without a continuous stream of new products developed through our strong customer connections, insights and experience transformed into innovation for a significant advantage in the rapidly changing world of vehicle repair. One of the latest additions is our Milwaukee-manufactured special hex driver, specifically designed for modern vehicles equipped with advanced driver assist systems like adaptive cruise control. Side-by-side with the techs making repairs, we saw the difficulty in aligning the radar sensors that enable autonomous control. The work was time-consuming and had significant risks associated with it—dismantling the front end of the car to clear the workspace. Our new NDDM 35 is a 3.5-millimeter hex driver featuring an extra-long 5.75-inch shaft, an enhanced reach that bypasses obstructions with ease, allowing necessary adjustments without dismantling anything. This newly launched tool also includes our Snap-on instinct ergonomic handle design, providing superior control and making it easier to execute the work with the precision required for sensitive radar brackets. Our NDDM 35 makes repairs faster, easier, and more profitable; and the techs have noticed it. In the quarter, we also launched a new lineup of hand tools based on other customer feedback. We address the difficulty of applying leverage to the opening of a standard combination wrench—the box end of the tool is great for engaging a fastener in a crowded engine bay. But when extreme force was needed, the open end of the wrench digs into hands. Our engineers designed our new XDSGM series, combining a box end, low-profile head with a soft grip ratchet handle, enabling maximum force to be applied comfortably, breaking bolts free without discomfort. The XDSGM exemplifies a fast payback item—a simple but powerful innovation that makes work safer and faster, and the techs have loved it, making it a million-dollar hit product since its launch. The Tools Group continues with customer connection, producing innovative products, operations pivoting to meet customer preferences for fast payback items, making progress in narrowing the gap, while keeping the network strong amidst turbulence. Now for RS&I. The volume in the fourth quarter was $456.6 million, up organically 1.6%. Gains were observed with both OEM dealerships and independent shop owners for diagnostic platforms and repair information products, partially offset by lower activity in undercar equipment. RS&I operating earnings in the quarter were up to $121.4 million, an increase of $8.1 million or 7.1%. Gross margins improved 200 basis points, and the operating margin was a strong 26.6%, up 150 basis points from the prior year, the highest ever. The record reflects a rise in software, but strong and broad RCI across the majority of RSI businesses—software and hardware—has increased margins significantly. Speaking of profitability, our Mitchell 1 specialty software division provides software to independent shops and continues to see success, expanding its database to reach 3 billion repair records and 500 million data points, a proprietary advantage that fuels our intelligent diagnostics platform. Our new product APOLLO+, released in the late third quarter, continues to excel, surpassing previous generations, notably increasing the number of software subscriptions. It’s easy, fast, and smart—representing a tech’s quickest payback access to Snap-on Intelligent Diagnostics. Additionally, in the quarter, our Undercar Equipment division released the new V4400 Commander wheel alignment machine, a game changer for shops needing alignment capabilities without costly expansions. Shops are often landlocked and can’t sacrifice everyday repair space for periodic alignments. The V4400 is a versatile, smart, and modular system with a design housing the control center in a small toolbox. It connects wirelessly with twin independent mobile towers, holds sophisticated camera setups, and can be easily stored away when not in use. Our proprietary software, based on our four-camera systems, enables quick setup, ensuring accurate alignments. The V4400 is nimble, versatile, quick, and makes profitable alignment possible for more shops. We’re confident in expanding RS&I’s position with repair shop owners and managers, continually offering new products developed by our value creation processes. We’re confident it’s a winning formula, and the Q4 results confirm that. That’s the quarter: sales up 0.2%, returning to level; OpCo operating margin at 22.1%, up 50 basis points, a new all-time high for Q4. The Tools Group is down but narrowing the gap; the pivot is working. RS&I operating margins at 26.6%, up 150 basis points—another profit high for an already high-margin group. C&I operating earnings are up 17.4%, with an operating margin of 16.7%, up 180 basis points. It was an encouraging quarter. Now I'll turn the call over to Aldo. Aldo?
Aldo Pagliari, CFO
Thanks, Nick. Our consolidated operating results for the fourth quarter are summarized on Slide 6. Net sales of $1,198.7 million in the quarter were slightly above the $1,196.6 million reported last year, reflecting an organic sales increase of $2 million. Continued strength in sales to customers in critical industries as well as gains with repair shop owners and managers offset the marginally lower sales of our franchise van network. Consolidated gross margin improved 140 basis points to 49.7% from 48.3% last year, reflecting increased sales and higher gross margin businesses as well as benefits from the company's RCI initiatives. Operating expenses as a percentage of net sales rose 90 basis points to 27.6% from 26.7% in 2023, primarily due to increased corporate and other operating costs. Operating earnings before financial services of $265.2 million in the quarter compared to $257.9 million in 2023. As a percentage of net sales, operating margin before financial services of 22.1% represented an improvement of 50 basis points from the 21.6% reported last year. Financial services revenue of $100.5 million in the fourth quarter compared to $97.2 million last year, while operating earnings were $66.7 million compared to $67.9 million in 2023. Consolidated operating earnings of $331.9 million compared to $325.8 million last year. As a percentage of revenues, the operating earnings margin increased 30 basis points to 25.5% in 2024. Our fourth quarter effective income tax rate of 22.5% compared to 21.4% last year. Net earnings of $258.1 million compared to $255.3 million in 2023 and net earnings per diluted share of $4.82 in the quarter, compared to $4.75 per diluted share last year. Now let's turn to our segment results for the quarter. Starting with C&I on Slide 7. Sales of $379.2 million compared to $363.9 million last year, reflecting a 3.9% organic sales gain and $2.1 million of acquisition-related sales, partially offset by $1 million of unfavorable foreign currency translation. The organic improvement is largely due to gains in sales to customers serving critical industries, including a high single-digit increase in specialty torque. Regarding critical industries, in addition to higher torque product sales, activities in aviation and general industries were encouraging during the period. Gross margin improved 180 basis points to 41% in Q4 from 39.2% in 2023. This is largely due to increased sales volumes and higher gross margins in critical industry sectors and savings from RCI initiatives. Operating expenses as a percentage of sales of 24.3% in the quarter was unchanged from last year. Operating earnings for the C&I segment of $63.5 million compared to $54.1 million last year. The operating margin improved 180 basis points to 16.7% from 14.9% in 2023. Turning now to Slide 8. Sales in the Snap-on Tools Group of $506.6 million compared to $513.3 million a year ago, reflecting a 1.4% organic sales decline and $600,000 of favorable foreign currency translation. The organic decrease reflects a low single-digit decline in the United States business, partially offset by a mid-single-digit gain in our international operations. Again, this quarter, we believe that continued attenuation and a relatively modest year-over-year sales decline in the U.S. mobile network favorably demonstrates the resilience of this business given the still uncertain environment. Gross margin declined 60 basis points to 44.6% in the quarter from 45.2% last year, mostly due to the decreased volumes and the effects of increased sales of lower gross margin products. Operating expenses as a percentage of sales improved 10 basis points to 23.5% in the quarter from 23.6% in 2023. Operating earnings for the Snap-on Tools Group of $106.9 million compared to $111 million last year. The operating margin of 21.1% compared to 21.6% in 2023. Turning to the RS&I Group shown on Slide 9. Sales of $456.6 million compared to $450.8 million in 2023, reflecting a 1.6% organic sales increase, partially offset by $1.5 million of unfavorable foreign currency translation. The organic gain includes a mid-single-digit increase in activity with OEM dealerships, and a low single-digit gain in sales of diagnostic and repair information products to independent repair shop owners and managers, the latter aided by the introduction of our new APOLLO+ handheld diagnostic platform. These gains more than offset a low single-digit decline in sales of undercar equipment. Gross margin improved 200 basis points to 47% from 45% last year, primarily reflecting increased sales of higher gross margin products, including a more favorable mix of software and benefits from RCI initiatives. Operating expenses as a percentage of sales rose 50 basis points to 20.4% from 19.9% in 2023, largely due to increased personnel and other costs. Operating earnings for the RS&I Group of $121.4 million compared to $113.3 million last year. The operating margin improved 150 basis points to 26.6% from the 25.1% reported last year. Now turning to Slide 10. Revenue from financial services increased $3.3 million, or 3.4% to $100.5 million from $97.2 million last year. Financial services operating earnings of $66.7 million compared to $67.9 million in 2023. Financial services expenses were up $4.5 million from 2023 levels, including $4.4 million of higher provisions for credit losses. As a percentage of the average services portfolio, the financial services portfolio expenses were 1.3% in the quarter as compared to 1.2% last year. In the fourth quarters of 2024 and 2023, the respective average yields on finance receivables were 17.7% and 17.8%, while the average yields on contract receivables were 9.1% and 8.9%, respectively. Total loan originations of $285.1 million in the fourth quarter represented a decrease of $18 million or 5.9% from 2023 levels, including a 5.8% decline in extended credit originations. The decrease in extended credit originations mostly reflects lower sales of big-ticket long payback items. Moving to Slide 11, our year-end balance sheet includes approximately $2.5 billion of gross financing receivables, with $2.2 billion coming from our U.S. operation. For extended credit or finance receivables, the U.S. 60-day-plus delinquency rate of 2% is up 20 basis points from the fourth quarter of 2023. Trailing 12-month net losses for the overall extended credit portfolio of $66.3 million represented 3.32% of outstanding balances at year-end. While delinquencies and net losses have been trending upward, we believe that these portfolio performance metrics remain relatively balanced considering the current environment. Now turning to Slide 12. For the quarter, cash increased by $47.2 million, compared to an increase of $42.2 million in the fourth quarter of last year. Cash provided by operating activities of $293.5 million in the quarter represented 111% of net earnings. Net cash used by investing activities of $40.2 million mostly reflected net additions to finance receivables of $26.2 million and capital expenditures of $18.1 million. Net cash used by financing activities of $201.5 million included cash dividends of $112.3 million and the repurchase of 315,000 shares of common stock for $112.5 million under our existing share repurchase programs. As of year-end, we had remaining availability to repurchase up to an additional $429.4 million of common stock under our existing authorizations. Turning to Slide 13. Trade and other accounts receivable increased $24.3 million from 2023 year-end. Days sales outstanding of 62 days compared to 60 days at year-end 2023. Inventories decreased $62.5 million from 2023 year-end; on a trailing 12-month basis, inventory turns were 2.4% compared to 2.3% at year-end 2023. Our year-end cash position was $1,360.5 billion compared to $1,001.5 billion at the end of 2023. In addition to our existing cash and expected cash flow from operations, we have more than $900 million available under our credit facilities, with no amounts borrowed or outstanding under the credit facility during the year, nor was any commercial paper issued or outstanding in that year. That concludes my remarks on our fourth quarter performance. I’ll now briefly review a few outlook items for 2025. With respect to corporate costs, we currently believe that the expenses in each quarter of 2025 will be relatively in line with those incurred in the fourth quarter of 2024 or about $27 million per quarter. Additionally, during 2025, we expect to incur approximately $6 million pre-tax per quarter of increased non-service pension costs, largely due to higher amortization of actuarial losses. These non-cash costs will be recorded below operating earnings as part of other income and expense net on our statement of earnings. We expect that capital 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%. Finally, in 2025, our fiscal year will contain 53 weeks of operating results with the additional week occurring at the end of the fourth quarter. This occurs every five or six years and historically it has not had a significant effect on our full year or fourth quarter total revenues or net earnings. I’ll now turn the call back over to Nick for his closing thoughts.
Nick Pinchuk, CEO
Thanks, Aldo. Well, our fourth quarter progress against uncertainty. The markets remained robust; repair spending is up, the number of techs is up, wages are up, the car park is aging, and vehicle complexity is rising, but the uncertainty remains created by the unpredictable macro environment. We made progress against the wind. Resilience was on display in the Tools Group; the pivot is succeeding and the gap is shrinking. The balance and breadth of our operations were evident in the performance of C&I and RS&I, both turning in solid quarters with outstanding profitability. The Tools Group experienced organic sales down 1.4%, but we’re making continuing progress and maintaining the strength of our network. C&I sales are up 3.9% organically, and OI margins of 16.7% are up 180 basis points at another high. Significant sales and profit gains in custom kits and precision torque confirm that we can roll out the Snap-on brand out of the garage successfully and very profitably. Finally, RS&I saw sales up 1.6% with OI margins of 26.6%, a rise of 150 basis points—which represents another record—all driven by promising software results and committed RCI. All elements came together for sales of $1,198.7 million, an increase of 0.2%, returning to positive territory. The overall gross margin rose 140 basis points to 49.7%, and the OI margin was 22.1%, up 50 basis points, yet another record. We are encouraged by the quarter and our prospects going forward. Notwithstanding continuing uncertainty, we believe our markets will remain resilient and robust, reflecting the essential nature of the critical tasks that define them. We believe we've not only maintained but expanded our considerable advantages in product, brand, and people as we navigate turbulence. Our Snap-on Value Creation Processes deliver value every day, day in and day out. Our capable team is a difference maker—battle tested, able to create positive outcomes despite obstacles. This has happened repeatedly, and we have all been witnesses. We believe these positives will keep our enterprise moving forward, extending and continuing its positive trajectory throughout 2025 and beyond. Before I turn the call over to the operator, I want to address our franchisees and associates directly. I know many of you are listening. I’ve spoken today on the special nature of our enterprise—resilient, capable, determined—creating progress from challenges; you are the principal authors of this success. For your dedication in moving our company forward, prevailing in turbulence, and proceeding with confidence, you have my congratulations. For your capability and scale, you have my admiration. And for your unwavering dedication and belief in our corporation's future, you have my thanks. Now, I'll turn the call over to the operator.
Operator, Operator
Our first question today comes from Scott Stember of Roth MKM. Please go ahead.
Scott Stember, Analyst
Good morning, guys and thanks for taking my question.
Nick Pinchuk, CEO
Hi, Scott.
Scott Stember, Analyst
Talking about tools. I'm just trying to flesh out how close we are to, I guess, turning positive. Can you maybe talk about the confidence at the shop level? I know you talked about it, I guess, still being high, but their confidence is high, but cash poor. Has that scenario actually gone backwards at all? And the second part of that...
Nick Pinchuk, CEO
I don't think it's going back. Look, I think it's like this. I was in a shop a couple of weeks ago and talked to some franchisees the other day and talked to techs in other parts of the country. People are pretty confident that vehicle repair is robust because of everything I mentioned—complexity, the Bureau Labor data; everybody is talking about needing more techs. They have a lot of work. Try getting your car repaired, and you'll see what I mean. Addressing the uncertainty, one thought might have been that when the election resolved, maybe the stated positive view toward business, particularly towards those who work in it—like comments about technical education—have been music to the ears of the techs. On the other hand, they see ongoing initiatives and rapid shifts in Washington that cultivate uncertainty. So they’re on Space Mountain at Disney World—getting on the ride and moving in unpredictable directions, but still confident they’ll get to the right place in the end. They're waiting to see what happens, looking for short payback items. If things calm down in Washington and advance predictably for several quarters, that would be a big change.
Scott Stember, Analyst
Got it. And as far as Snap-on and the actual pivoting, are you guys fully pivoted in making the products you want to?
Nick Pinchuk, CEO
We wanted to. I was encouraged by the 1.4. If you look at each year, it was down 7, then down 7.7, then down 3.7, and now down 1.4. That’s a positive indication. I can't tell you the slope of the curve, but I do believe we keep pivoting and getting better at things.
Scott Stember, Analyst
Great. And then just last question on C&I and RS&I. Could you tell us what the external sales were for each on an organic basis?
Nick Pinchuk, CEO
External sales for RS&I were closer to what it is; C&I external sales were somewhere in the range of half of that. That's how it is; some of the stuff they produce goes through the Tools Group.
Scott Stember, Analyst
Oh, got you. Okay. Great. All right. That's all I have for now. Thank you.
Operator, Operator
The next question comes from Sherif El-Sabbahy of Bank of America. Please go ahead.
Unidentified Analyst, Analyst
Hi, good morning.
Nick Pinchuk, CEO
Hi, Sherif.
Unidentified Analyst, Analyst
I was just wondering if you could add a bit more color on the decline in originations. Is that mostly a function of product mix or are you seeing customers financing less of the purchases overall?
Nick Pinchuk, CEO
Mostly tool storage down. Part of this is predictable based on customer preference. People are less willing to engage in long-term financing, opting instead for shorter payback items they can liquidate quickly. The APOLLO+ is lower in cost, bringing quicker payback, which affects our origination mix. Additionally, selling decisions don’t always correspond directly to timely data.
Unidentified Analyst, Analyst
Thank you.
Operator, Operator
The next question comes from Luke Junk of Baird. Please go ahead.
Luke Junk, Analyst
Good morning. Thanks for taking the questions.
Nick Pinchuk, CEO
Good morning, Luke.
Luke Junk, Analyst
Nick, I'm hoping you could double-click on the strength that you're seeing in specialty torque right now. It seems like that should benefit multiple areas across both critical industries and growing opportunities within auto repair. Do you have any thoughts around investment there?
Nick Pinchuk, CEO
That's certainly a focus area for us. We acquired Mountz last year, which provided us with technology that increased our torque capabilities significantly. As a result, we will continue investing and looking into acquisitions that enhance our capabilities in this area.
Luke Junk, Analyst
Good stuff. And for my follow-up, could you share any thoughts on continued headwinds in big-ticket sales and what you need for growth in the Tools Group this year?
Nick Pinchuk, CEO
There's definitely a lot left in small ticket sales. The pivot is about introducing more attractive new products to drive customer engagement. If we maximize our product offerings, that will strengthen our trajectory moving forward. There’s potential for growth, but it requires improved product engagement.
Luke Junk, Analyst
Got it. Thanks, Nick.
Nick Pinchuk, CEO
Yes.
Operator, Operator
Our next question comes from Bret Jordan of Jefferies. Please go ahead.
Bret Jordan, Analyst
Hey. Good morning, guys.
Nick Pinchuk, CEO
Hey, Bret.
Bret Jordan, Analyst
Let me throw the tariff question out there. Your domestic mix versus your competitors—how do you see yourselves positioned, and what’s the impact?
Nick Pinchuk, CEO
We are more insulated from import tariffs than many competitors. While we do have some tariff costs, a significant portion of our product line is manufactured domestically, giving us a strong position to face potential impacts.
Bret Jordan, Analyst
What about the relative strength of international tools versus the U.S. market?
Nick Pinchuk, CEO
The U.S. market is more affected by uncertainties, with various geopolitical factors contributing to that. Our international businesses are showing strength; they've rebounded from previous downturns. Overall, we take a strong position and continue to adapt to market dynamics.
Operator, Operator
The next question comes from David MacGregor of Longbow Research. Please go ahead.
Unidentified Analyst, Analyst
Hey, good morning. This is Joe Nolan on for David.
Nick Pinchuk, CEO
Welcome to the party.
Unidentified Analyst, Analyst
First, just a strong quarter for the critical industries and for the torque tools business. I assume you're shipping against some backlog orders. What are you seeing in terms of order activity?
Nick Pinchuk, CEO
Order activity is strong. We have a steady backlog; it's normalizing, not building up. Demand for customized kitting is rising, and we expect strong growth and profitability in this segment.
Unidentified Analyst, Analyst
Understood. Any insight you can share about margins into 2025?
Nick Pinchuk, CEO
Our profitability has great runway, especially in profitable divisions like RS&I, software areas, and critical industries. RCI across our corporation is driving significant improvements.
Unidentified Analyst, Analyst
Just quickly on the Tools Group, did you talk about sell-in versus sell-through in the quarter?
Nick Pinchuk, CEO
I did not. It's about the same.
Operator, Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Sara Verbsky for any closing remarks.
Sara Verbsky, Vice President of Investor Relations
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.
Operator, Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.