Snap-On Q2 2025 Earnings Report

Snap-On EPS Results

• Actual EPS: $4.72
• Consensus EPS: $4.61
• Beat/Miss: Beat by +$0.11
• One Year Ago EPS: $5.07

Snap-On Revenue Results

• Actual Revenue: $1.18 billion
• Expected Revenue: $1.16 billion
• Beat/Miss: Beat by +$21.56 million
• YoY Revenue Growth: N/A

Snap-On Announcement Details

• Quarter: Q2 2025
• Date: 7/17/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, July 17, 2025
• Conference Call Time: 10:00AM ET

Snap-On (NYSE:SNA) manufactures and markets tools, equipment, diagnostics, and repair information and systems solutions for professional users worldwide. It operates through Commercial & Industrial Group, Snap-on Tools Group, Repair Systems & Information Group, and Financial Services segments. The company provides hand tools, including wrenches, sockets, ratchet wrenches, pliers, screwdrivers, punches and chisels, saws and cutting tools, pruning tools, torque measuring instruments, and other related products; power tools, such as cordless, pneumatic, and hydraulic and corded tools; and tool storage products comprising tool chests, roll cabinets, and other products. It provides handheld and computer-based diagnostic products, service and repair information products, diagnostic software solutions, electronic parts catalogs, business management systems and services, point-of-sale systems, integrated systems for vehicle service shops, original equipment manufacturer purchasing facilitation services, and warranty management systems and analytics; and engineered solutions. In addition, the company offers solutions for the service of vehicles and industrial equipment that include wheel alignment equipment, wheel balancers, tire changers, vehicle lifts, test lane equipment, collision repair equipment, vehicle air conditioning service equipment, brake service equipment, fluid exchange equipment, transmission troubleshooting equipment, safety testing equipment, battery chargers, and hoists, as well as after-sales support services and training programs. Further, it provides financing programs to facilitate the sales of its products and support its franchise business. It serves the aviation and aerospace, agriculture, infrastructure construction, government and military, mining, natural resources, power generation, and technical education industries. Snap-on Incorporated was incorporated in 1920 and is headquartered in Kenosha, Wisconsin.

Snap-On Q2 2025 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: Overall Q2 net sales were flat at $1.18 billion with an organic decline of 0.7%, OpCo operating margin down 180 bps to 22%, and EPS of $4.72 reflecting 25¢ of year-over-year headwinds.
• Positive Sentiment: The Snap-on Tools Group delivered a 1.6% organic sales increase and a 23.8% operating margin—one of its highest ever—driven by a successful pivot to faster-payback items.
• Positive Sentiment: RS&I sales rose 2.3% organically with a 60 bp margin expansion to 25.6%, marking 12 of 13 consecutive quarters of margin growth thanks to software strength and the new Triton wireless diagnostics.
• Negative Sentiment: The C&I segment saw a 7.6% organic sales decline and operating margin drop 320 bps to 13.5%, as project delays post-“liberation day” tempered demand despite improving orders late in the quarter.
• Positive Sentiment: Gross margin showed resilience at 50.5%, down only 10 bps despite a 50 bps forex headwind, as RCI initiatives and local manufacturing mitigated tariff impacts.

Presentation

[Operator]

Good day, and welcome to the Snap on Inc. Twenty twenty five Second Quarter Results Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

[Operator]

I would now like to turn the conference over to Ms. Sarah Verbsky, Vice President of Investor Relations. Please go ahead, ma'am.

[Sara Verbsky, VP - IR at Snap-on]

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.

[Sara Verbsky, VP - IR at Snap-on]

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 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 that otherwise discuss management's or the company's outlook, plans, projections are forward looking statements, and actual results may differ materially from those made in such statements.

[Sara Verbsky, VP - IR at Snap-on]

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?

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Thanks, Sarah. Morning, everybody. As usual, I'll start the call by 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.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

It's like 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 and products and brand and people, we navigated the roller coaster and exited the quarter stronger than when we answered. 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.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Let's talk about the results. Our sales of 1,000,000,179,400,000.0 as reported were flat to last year, including 8,600,000.0 in favorable foreign currency translation or organic sales were down seven tenths of a percent, and they were mixed, but overall balanced. Opco operating income for the quarter was 259,100,000.0, 7.6% below last year, which included 11,200,000 from the nonrecurring 2,024 legal win. OI margin was 22%, lower by a 180 basis points versus last year, which included a 100 basis points from that legal matter. Notably, the gross margin was 50.5%, 10 basis points behind last year, reflecting continued resilience.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Rapid continuous improvement balanced 50 basis points of unfavorable currency transactions. In effect, our OpCo OI GAAP 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 $68,200,000 were down 2.8% from last year's $70,200,000 And combined with the optical results, the overall OI margin for the quarter was 25.5%, which compared the 27.4% recorded last year, which included the legal benefit. This time was 90 basis points. EPS for the quarter was $4.72, thirty five percent 35¢ below last year.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

16¢ from last year's legal payment was included in the 24 number, and this year's level included 9¢ impact a 9¢ impact from higher pension amortization costs. In other words, there were 25¢ of headwinds in the year over year comparison of EPS. So now let's speak about the market. So those are results, but now let's speak about the market. We believe the automotive repair environment continues to be favorable.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

We did see mixed but improved results with the technician. The tools group was up low single digits in The US network, while the international vans were flat. And from what we're hearing directly from the franchisees in the text, from the grassroots, I believe vehicle repair emphatically remains a very favorable place to to operate, and the industry metrics continue to confirm that view. Miles driven, average vehicle age, household spend on repairs, tech talent, and tech wages, they're all up. Now the macro environment is still turbulent, but the tech, uncertainty has stabilized.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

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. You can see it in our second quarter results. We like the way the numbers are moving. It's a positive sign.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

On the other side of auto repair, where repair systems and information, the RS and I group is displaying encouraging progress, expanding Snap on's presence with repair shop owners and managers with particular strength in OEM dealerships. Things are looking okay. Upgrading facilities and equip you know, the OEM dealerships upgraded facilities and equipment to match the growing complexity of the new models. Now there there are pockets of hesitation on garage projects with some independent shops thinking that delay and the turbulence is the 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.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

So in general, the segment remains strong and you can see it all over the RSNI results and for 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.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

As the quarter progressed, however, the the initial shot 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, describe our markets as continuing to offer opportunities that we believe display momentum. Challenges do exist.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

There are headwinds, but we're confident with our advantages and strengthening product lines that solve critical tasks. In our extraordinary brand that marks the serious, the critical, and the professional, and our very experienced team that's capable, committed, and battle tested, will prevail against the difficulties and continue moving positively. So now let's move to the segments. The commercial and industrial group was the place with most impacted by the shock early in the quarter. You know what?

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

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 $4,500,000 in favorable foreign currency translation and an organic sales decline of 7.6%. C and I's operating income was $46,900,000 below twenty twenty four levels by $15,300,000 Operating margin was 13.5%, down three twenty basis points. But we did see upward motion as the quarter progressed, as customers accommodated to the environment. So we're confident in and committed to extending in the critical industries, And keep strengthening our position with C and I as we move forward, observing the task, using the insights to create products that make work easier.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

A great example is the next generation, quarter inch drive 14.4 volt cordless ratchets, increased power and speed, 40 foot pounds of torque for break and loose stubborn fasteners. And once freed, the tool's 400 RPMs kick in and the fasteners fly off. It's a real time saver. Our emerging North Carolina plant just released two models, the CTRA 25 offering a compact frame and the CTRA 27 with an extended neck. Two tools to maximize efficiency with techs are working at hard to reach out of the way applications.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

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 in this situation that over tighten, that can damage components. And our ring of fire creates 300 creates three sixty degrees of daylight, beaming from six LEDs generating 27 lumens, illuminating even a cavernous workplace. All of this serving to make work much easier.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

The CTR eight twenty five and eight twenty seven 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 that they're destined for our million dollar hit product list. Now, the specialty torque business remains red hot. It actually had a strong quarter.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Part of the reason is 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 five fifty unit. So it joined our growing array of cordless torque multipliers. This this tool is 66% lighter and 20% smaller than its big brother, the one inch CTM 800, and it delivers effortless effortlessly, it delivers torque all the way from 160 foot pounds to five fifty foot pounds. It's ideal for tackling a range of tasks in a growing number of heavy duty applications that require precise torque.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

The new tool enables much greater efficiency and comfort. It replaces the commonly used impact gun and torque wrench combinations with a single tool, eliminating several cumbersome steps, providing a much safer and more ergonomic path to repair. It's a design that combines the efficiency of our extraordinary Norbard 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 and, you know, the the unique Snap on 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 safely and without failure.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Our CTM five fifty, 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. Well, that's C and I, absorbing the shock, moving forward, delivering solutions that make critical work easier, safer, and more productive. Now on to the tools group. Organic sales were up 1.6% with a low single digit improvement in The US and the international network flat to last year. The operating income was 116,700,000.0, and that compares with a 114,800,000.0 in 2024 with an operating margin of 23.8%, flat to last year, but still one of the group's top margin levels ever achieved against the wind.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

As I said, 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 tool storage boxes decreased in the quarter, but our connection with grassroots customers indicate that the uncertainty has stabilized. And over the period, the tools group pivot to faster payback items gain gain 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 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.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

So for tech servicing a growing sec servicing vehicles of of growing complexity, access is big. They need help reaching, squeezing, contorting their way into compact areas, trying to make repairs without the dismantling things like parts like 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 principle value creating mechanism well in the 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.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

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 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 requires removing fan shroud shrouds or a range of other parts.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

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 F k c 72, a three inch h drive stubby length hand ratchet produced in our Elizabethton, Tennessee plant. It's our smallest three h inch ratchet ever.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

I mean, it's tiny. About the length of your pinky. And you know there are lot of narrow passage in a car. Well, this stuff you can go wherever your fingers can reach. But even though it's small, it offers great strength courtesy of Snap on's unique dual pole system and the 72 tooth design enables five degrees a five degree swing art, another access enabler.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

And the seal head increases reliability, keeping the debris that can mock up the works from entering the gear mechanism. It's it's another snap on must have for serious tech and it helped drive the pivot in the quarter. And perhaps best of all, just released the redesigned 15 inch extra long needle nose pliers set, cold forged at our Milwaukee plant. Now that's a process that's difficult to man to master. But if you get it right, and Milwaukee is one of the few who can, it results in greater strength and delivers tighter tolerances without additional and more costly machining.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

The long plier neck reaches through restricted openings, creating access, and the cold forging 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 of a quick making sure and quick retrieval. That's a great and significant advantage.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Each of these new products make work easier and repairs faster. And all three have already achieved what we call our $1,000,000 hit product status. And meeting with tech in the 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 plan Algona, Iowa released a special offering of entry level KRA twenty four twenty two classic series roll cap. Doctor's 55 inches wide, built from one piece welded body, which is with reinforced corners and a 14 gauge steel bottom panel that supports a payload of 2,400 pounds over a ton of tools.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

It's ideal for organizing a tech's investments with two two drawers spanning 50 inches wide, one five inch deep for deep sockets, and a three inch drawer for storing long flybars and extensions. The box is functional, rugged, and it's relatively economical. But we'll get your attention in this array. It's it's the array of eye popping two tone paint schemes. One, a black case with extreme green doors and black trim is my personal favorite.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

I can tell you, it is bright. Any tech would stand out with this beaming box in this space. Siri just came out and it's already had significant demand. So that's a tools group. Pivot, gaining on uncertainty, back to growth, exiting on a quarter with momentum, and great American made products were the big drivers.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Now RS and I. Sales in the second quarter were 468,600,000 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 or RS and I were 119,800,000.0, up 6,200,000.0 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 for RS and I has increased year over year for 12 of the last 13 quarters, Sixth Street. That's the rise of software and the power of RCI, boom shackalacka.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

RS and I shine through the turbulence, leveraging our customer connection and launching innovative products. One example is, if you call him, Triton, born in our San Jose facility, positioned in the middle of our intelligence diagnostics offering. Triton provides a wireless connection between the car and the handheld. Text can move freely around the bay under the car under the car, inspecting, troubleshooting, and testing without restraint. And and this is important.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

It does that without losing the lightning speed that's the hallmark of our wired units. And Triton's two channel lab scope lab scope now provides zoom capability, and this is crucial. When when a wave waveform glitches happen in a blink of an eye, and they often do. They're hard to catch on a standard unit. So Triton customers can now record, playback the test, magnify the pat the pattern, zero in on the abnormally, identify intermittent problems.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

That's right. Flex 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 powerful in tech hands and it's a clear winner in the shops. Arch and I is on a roll.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

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 in software, and a dedication to RCI. We're gonna keep driving and expand RS and I's position where repair shop owners and managers offer more new products developed by our value creation process, and we're confident it's a winning formula. Well, that's our second quarter. Marked by both challenge and advancement. C and I down, impacted by the shock of liberation day and a bout of wait and see, but some recovery is underway as combination develops.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

The tools group, the pivot to quicker paybacks gaining traction, Sales up 1.6 organically. OI margin, 23.8%, flat to last year, but representing the third highest in the group's history against the wins. And RS and I, 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 1,000,000,179,400,000.0 flat. Gross margins, 50.5%, down 10 basis points.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Unfavorable and unfavorable currency transaction and the impact of value 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. Results demonstrating operational strength, all achieved in difficult conditions. It was an encouraging quarter. Now I'll turn the call over to Aldo. Aldo?

[Aldo Pagliari, SVP - Finance & CFO at Snap-on]

Thanks, Nick. Our consolidated operating results for the second quarter are summarized on slide six. Net sales of $1,179,400,000 in the quarter were unchanged from last year, reflecting an $8,600,000 organic sales decline that was offset by favorable foreign currency translation. 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, or our C and I group, sales were down year over year reflecting the economic and geopolitical uncertainty that occurred throughout the period.

[Aldo Pagliari, SVP - Finance & CFO at Snap-on]

Consolidated gross margin of 50.5% compared to 50.6% last year and included 50 basis points of unfavorable foreign currency effects, partially offset by benefits from the company's RCI initiatives. While Snap on is relatively advantaged in the current tariff environment, generally manufacturing products in the markets where they are sold, our cost can be affected by trade policies. In the quarter, we mitigated 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 US dollar. As we have factories in Sweden serving both the C and I and RS and I groups.

[Aldo Pagliari, SVP - Finance & CFO at Snap-on]

In C and I, we manufacture cutting tools for our European and emerging markets, while in the RS and I, our car aligner facility produces collision products that are sold globally. Operating expenses as a percentage of net sales rose 170 basis points to 28.5% from 26.8% in 2024, mostly due to a non recurring benefit of $11,200,000 from legal payments received last year and increased personnel and other costs, including ongoing brand investments. Operating earnings before financial services of $259,100,000 in the quarter, compared to 280,300,000.0 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 $101,700,000 in the second quarter, compared to 100,500,000.0 last year, while operating earnings of 68,200,000.0 compared to 70,200,000.0 in 2024.

[Aldo Pagliari, SVP - Finance & CFO at Snap-on]

Consolidated operating earnings of 327,300,000.0 compared to 350,500,000.0 last year. As a percentage of revenues, the operating earnings margin of 25.5% compared to twenty seven point four percent in 2024, again, including a benefit from the legal bans. Our second quarter effective income tax rate was 22.5% in 2025 and twenty two point six percent in 2024. Net earnings of $250,300,000 compared to 271,200,000.0 in 2024. And net earnings per diluted share of $4.72 in the quarter compared to $5.07 per diluted share last year.

[Aldo Pagliari, SVP - Finance & CFO at Snap-on]

When comparing the quarter's earnings per share with the second quarter of the prior year, there is 25¢ per share of headwinds on a year over year basis. In the second quarter of twenty twenty five, diluted earnings per share included approximately 9¢ per share of increased year over year non service and net periodic pension expenses, primarily from higher amortization of actuarial losses. While the 2024 included $0.16 per share benefit from the legal payments. Now let's turn to our segment results for the quarter. Starting with C and I group on slide seven.

[Aldo Pagliari, SVP - Finance & CFO at Snap-on]

Sales of $347,800,000 compared to $372,000,000 last year, reflecting a 7.6% organic sales decline, partially offset by $4,500,000 of favorable foreign currency translation. The organic reduction includes double digit decreases in the segment's Asia Pacific and European based hand tool businesses, and a mid single digit decline in activity with customers in critical industries, partially offset by a high single digit rise in the specialty torque operation. Overall, the sales decline reflects a 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 US 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.

[Aldo Pagliari, SVP - Finance & CFO at Snap-on]

This decline was primarily due to the lower sales volumes and 50 basis points of unfavorable foreign currency effects, partially offset by savings from RCI initiatives. Operating expenses as a 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 C and I segment of 46,900,000.0 compared to 62,200,000.0 last year. The operating margin of 13.5% compared to 16.7% in 2024. Turning now to slide eight.

[Aldo Pagliari, SVP - Finance & CFO at Snap-on]

Sales in the Snap on Tools Group of $491,000,000 compared to $482,000,000 a year ago, reflecting a 1.6% organic gain and a $1,200,000 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. During the quarter, we believe our ongoing pivot to shorter payback items was 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.

[Aldo Pagliari, SVP - Finance & CFO at Snap-on]

Operating earnings for the Snap on Tools Group of $116,700,000 compared to $114,800,000 last year. The operating margin of 23.8% was unchanged from 2024. Turning to the RS and I group shown on slide nine, sales of $468,600,000 compared to 454,800,000 in 2024, reflecting a 2.3% organic sales increase and $3,100,000 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.

[Aldo Pagliari, SVP - Finance & CFO at Snap-on]

Gross margin improved 130 basis points to 46.8% from 45.5% last year, primarily reflecting increased sales of higher gross margin products and benefits from RCI initiatives, partially offset by higher material freight and other costs as well as 40 basis points of unfavorable foreign currency effects. Operating expenses as a percentage of sales rose 70 basis points, 21.2%, and 20.5% in 2024, largely due to increased personnel and other costs. Operating earnings for the RSNA group of 119,800,000.0, compared to $113,600,000 last year. The operating margin improved 60 basis points to 25.6% from 25% reported in 2024. Now turning to slide 10.

[Aldo Pagliari, SVP - Finance & CFO at Snap-on]

Revenue from financial services of $101,700,000 reflected an increase of 1,200,000.0 from 100,500,000.0 last year. Financial services operating earnings of 68,200,000.0 compared to $70,200,000 in 2024. Financial services expenses of 33,500,000.0 compared to 30,300,000.0 last year. The increase is primarily due to $1,500,000 of higher provisions for credit losses, as well as a rise in personnel and other costs. As a percentage of the average financial services portfolio expenses were 1.3% in the second quarter of twenty twenty five, and 1.2% in 2024.

[Aldo Pagliari, SVP - Finance & CFO at Snap-on]

In the 2025 and 2024, the respective average yields on finance receivables were 17.517.7%, while the average yields on contract receivables were 9.18.9% respectively. Total loan originations of $293,000,000 in the second quarter, represented a decrease of $15,100,000 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 during the quarter. Moving to slide 11, our quarter end balance sheet includes approximately 2,500,000,000.0 of gross financing receivables and 2,200,000,000.0 from our US operation.

[Aldo Pagliari, SVP - Finance & CFO at Snap-on]

For extended credit or finance receivables, The US sixty day plus delinquency rate of 1.8% is up 20 basis points from the second quarter of twenty twenty four, but down 20 basis points from the rate reported last quarter. Trailing twelve month net losses for the overall extended credit portfolio of $69,500,000 represented 3.46% of outstanding at quarter end. We believe these portfolio performance metrics remain relatively balanced considering the current environment. Now turning to slide 12. Cash provided by operating activities of 237,200,000.0 in the quarter, compared to 301,100,000.0 last year.

[Aldo Pagliari, SVP - Finance & CFO at Snap-on]

The lower cash flow generation as compared to the second quarter of twenty twenty four, largely reflects higher year over year increases in working investment and lower net earnings. Net cash used by investing activities of 46,000,000 mostly reflected net additions to finance receivables of 26,400,000.0 and capital expenditures of $19,700,000 Net cash used by financing activities of 170,900,000.0 included cash dividends of 111,800,000.0 and the repurchase of 250,000 shares of common stock for $79,000,000 under our existing share repurchase program. As of quarter end, we had remaining availability to repurchase up to an additional 357,900,000 of common stock under our existing authorizations. Turning to slide 13, trade and other accounts receivable represented an increase of $26,800,000 from 2024 year end. The day sales outstanding of sixty five days were down one day sequentially from last quarter compared to sixty two days at year end 2024.

[Aldo Pagliari, SVP - Finance & CFO at Snap-on]

Inventories increased by $54,300,000 from 2024 year end, primarily due to $37,400,000 of currency translation and some investment intended to mitigate supply chain uncertainties. On a trailing twelve month basis, inventory turns of 2.4 were the same as year end 2024. Our quarter end cash position of $1,000,000,458,300,000 compared to $1,000,000,360,500,000 at year end 2024. In addition to our existing cash and expected cash flow from operations, have more than $900,000,000 available under our credit facilities. There were no amounts borrowed or outstanding under the credit facilities during the year, nor was any commercial paper issued or outstanding in the year. That concludes my remarks on our second quarter performance.

[Aldo Pagliari, SVP - Finance & CFO at Snap-on]

I'll now review a few outlook items for the balance of the year. With respect to corporate costs, we currently believe that expenses for the remainder of 2025 will approximate twenty seven million dollars per quarter. Additionally, during 2025, as previously shared, we recognize and expect to continue to incur approximately $6,000,000 pre tax per quarter of increased non service pension costs, largely due to higher amortization of actuarial 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 9¢ per diluted share quarterly negative effect on EPS for the balance of 2025. We expect that capital expenditures will approximate $100,000,000 and we currently anticipate that our full year 2025 effective income tax rate will be in a range of 22 to 23%.

[Aldo Pagliari, SVP - Finance & CFO at Snap-on]

Our expected range, which factors in The US tax bill that was recently passed, is unchanged from previous estimates. Finally, in 2025, our fiscal year will contain fifty three weeks of operating results with an 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 turn the call back to Nick for his closing thoughts. Nick?

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Thanks, Aldo.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Snap on second quarter. Results marked by resilience, portfolio balance, shock, accommodation, and progress. C and I, international markets and critical industries disrupted by liberation day, the shock giving way to accommodation and and accommodation in the storm or to the storm. Tools group, continuing uncertainty. The pivot the pivot gaining some traction.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Sales up 1.6% organically. US up. International flat. A return to positive. OI margins, 23.8%, flat to last year, but among the group's strongest ever.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

RS and I, continuing strength, sales up 2.3% organically, OI margin of 25.6%, up 60 basis points, rising again. And they're all came together for an overall demonstration of performance against turbulence. Sales for the corporation were $1,179,400,000 essentially flat in the difficulty. OpCo OI margin 22%, down 80 basis points adjusting for last year's legal benefit with the gap driven primarily by spending to to maintain full strength, preserving advantage for when the turbulence abates. And EPS, $4.72 against the comparisons against 25% 25¢ a headwind.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

We believe we believe that 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 US and and in the considerable distributed know how. We make a version of of our products in almost every region, but especially in The US. 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. You see, we said we believe we're resistant to tariffs and we meant it.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

And we further believe that as we move forward, we have we have momentum as a shock received and we have advantage rooted deeply in our products, continually matching the increases in complexity 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 improve 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.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

I know many are listening. My friends, I know that the encouraging results we just discussed was created by your efforts, and present. For your 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 unwavering commitment to our future, you have my thanks.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Now I'll turn the call over to the operator. Operator?

[Operator]

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone 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, And the first question will come from Luke Junk with Baird. Please go ahead, sir.

[Luke Junk, Senior Research Analyst at Robert W. Baird & Co]

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.

[Luke Junk, Senior Research Analyst at Robert W. Baird & Co]

Just 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?

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Well, I think part of it was, I 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.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

You saw consumer sentiment drop from December to January by I think it was 20 basis points, 20 points, the lowest since '22, since the last big problem with supply chain and it's still down, but it rebounded a little bit. I would say that the early days of the administration spooked the grassroots. And so our pivoting was going better, which been going, but that spooking, 20 basis reflected in the 20 basis points, I don't mean to tie it exactly to that, really outland the pivot, but it kinda stabilized. They aren't affected so much by tariffs. Liberation Day didn't affect them so much.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

So they're more sitting there and not much happens really in the last, I guess, the bombing of Iran happened, but 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, might remember that I talked in the first quarter about, I think we can nimble into the lower end of of the of the big ticket items like the the solace in the first quarter with salute to solace was pretty successful. And we sold some heavy duty carts in the first quarter that were economical.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

And so we did some more of that in the same quarter, I talked about it on the call that the classic series with box that is cheaper than the other series and holds a ton of tools and has these eye popping colors that was pretty popular. So I think we learned, 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 had to do some some different things, but I think the pivot is now working pretty well. And I think we have momentum.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

I've I've said this in the in this thing, we we exited the quarter stronger than when we entered.

[Luke Junk, Senior Research Analyst at Robert W. Baird & Co]

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 we go through the back half of the year?

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

No, you're just as good as mine. I don't know. You know what I mean? Look, I this, originations were better. Like for government work, they're like, we're down half as much.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

That's a tough statement. We're down half as much as we were in the first quarter. I think we're down more this quarter where we're down 4.8%, 4.9% originations. And certainly that would have been, 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.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

I think it's gonna take a while for customers to accommodate. But as we saw in the pandemic, which is really, I'm kind of talking about that with the C and I 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, I'm worried, but nothing's really happened to me.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

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.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

I I don't know if the I don't know if I need the originations to come back right away, but I do think that eventually people if nothing big happens, they start to stabilize even more and people start to come back with the projection. But I'm not predicting anything like for the next quarter. As you know, Luke, I'm gonna say this again because I said it at every third the third quarter is always squirrely. Harder to predict than anything because the SFC is during that quarter, and that creates a kind of turbulence that you can never predict. We'll see how it goes.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

But I like the way things are going, I'll tell you that. You can see it in the numbers.

[Luke Junk, Senior Research Analyst at Robert W. Baird & Co]

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

[Aldo Pagliari, SVP - Finance & CFO at Snap-on]

Broadly speaking, Luke, April was much slower than what the full quarter turned out to be. So as I said, they improved as the quarter moved out. And we saw the biggest change in the day would be in the aviation and military related non defense sector, things of that nature. But general industry also started to improve. So again, while down yet in the quarter, we started to see some signs of improvement.

[Luke Junk, Senior Research Analyst at Robert W. Baird & Co]

Got it, I'll leave it there, thank you.

[Operator]

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

[Gary Prestopino, Managing Director at Barrington Research Associates]

Good morning, all.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Good morning.

[Gary Prestopino, Managing Director at Barrington Research Associates]

Did you call out what the FX impact on earnings per share was for the quarter in your narrative?

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

I did not. Would you like to know?

[Gary Prestopino, Managing Director at Barrington Research Associates]

Yes, I would.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Okay. 6¢.

[Gary Prestopino, Managing Director at Barrington Research Associates]

6¢ pop?

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Negative. Negative. Negative.

[Gary Prestopino, Managing Director at Barrington Research Associates]

Okay. 6¢ negative. Okay. Great. Thank you.

[Gary Prestopino, Managing Director at Barrington Research Associates]

Then a couple of questions here. The RSNI 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?

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Sure. Look, I I I Gary, don't know if I can say the price price point on this. Yeah. Okay. Let's say $4,500. Ballpark. Ballpark.

[Gary Prestopino, Managing Director at Barrington Research Associates]

$4,500.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Might be don't know how we can afford to sell it for that number, but okay. Around that number, it depends.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

So there's a lot of factors. What what's on promotion? What isn't? But let's say, thousand 500 to 5,000, something like that. It's in the middle of the intelligent diagnostic range.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

It's right in below Zeus and above Apollo. And and the difference is is the differences are is that it's wireless rather than wired. And the big the big deal here is is that our wired units were you know, their hallmark was they were like a lightning. You plug them in, you started them up and they really rolled up. This one comes up right away.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

So and it's wireless. So it gives you both the flexibility of wireless and the speed, the instant on of wired, and that's a cool thing. And then you have the other thing that we have a Zoom feature on the these things have two channel scopes. What So you do is you put the scope on a car and you watch a waveform here. But the thing is, sometimes the the problems in the car are very intermittent, very quick.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

They only have them for a little while and you can't really see them on the waveform carefully until you zoom right in and and look at small glitches. And the zoom feature allows you to freeze it and move it in. The waveform is a dynamic thing at first. So then you record it, freeze it, zoom in and catch the glitches. That's a big help.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

And then it has eight hour battery life, which is pretty long and it makes it quite usable. And then the other thing I think that's different is it has four times the memory. So the four times memory means you can store a whole lot of stuff, like a lot of waveforms, lot of procedures in it, a lot of data from other things. And it helps a lot of technicians really like it. I I, you know, I just was out with franchisees in in Connecticut and in Atlanta.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

I mean, you know, the bunch of these guys and then, you know, they're all franchisees are pretty positive and they love this unit. They love spelling. And the tech seems to like it too. So, we feel pretty good about it. So pretty well for, you know, for the the launch look was so we'll see how it goes.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

We like it though. I mean, it's it's having an impact.

[Gary Prestopino, Managing Director at Barrington Research Associates]

Yeah. That's good good to hear. And then just lastly, in the C and I group, I I think you called out that the international operations, you know, were sluggish. Did The US kinda mimic that? Know, I'm not sure how many how much you do in US and C And I, but I'm trying get an idea.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Yeah. C and I C and I roughly, for government work, Gary, the C and I is fifty fifty. 50 in North America, 50 outside The United States. You know, Europe, tops.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Asia, you know, are well, you know, Asia, we ourselves said, we're not importing anything from China. The thing is a 170 there's a 170% tariffs. Remember when they were a 170%? We just said no. So Asia is very, very discombobulated in this situation.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Not to mention, you got the you got some other markets disturbed, you know, like the South Korea, they just arrested the old president, you know, and everybody's moaning. And then in Thailand, they just declared the the former the the new prime minister a trader 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.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

I mean, is again a cross border position. They've got they've got GDP in UK was point 1%, GDP in Germany, point 3%, GDP in Spain, point 5%. Europe has got problems. I think at least for us, we're seeing that. And then in The United States, really what happens, that's like the European businesses and the Asian business, a lion's share of which is in C and I.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

And then you've got the industrial businesses. Industrial's got pick and ship businesses, which quick, you know, it's off the shelf, like, a little bit like the tools group. And then it's got project business, which is a big slug of their business. And these things, you think about it. Okay.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Liberation day happens. Well, we're tariffs. Well, the tariffs changed three times for China in the month of April. And then and then nobody they come out with 46% for Vietnam, and then they say, oh, never mind. It's gonna go to 10% until July 9.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

And then July 9, they come out and say, well, it's 4020%, but we're not sure because the 20% is for direct, the standard stuff and 40% of the transshipment. So people are sitting there saying, it's a very interesting phenomenon. It's a little bit like the pandemic, I would say. Kinda not congruent to the pandemic, but it's similar. If you have projects and you're thinking about doing things, you're saying, I'm not gonna commit to very much because I don't know where the world's gonna be.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

And I kinda have a feeling that there's a pretty close horizon and it's gonna resolve itself. So that means that put people back, particularly in the early parts of the quarter. You know, and people just said, geez, I don't wanna commit. I look like a fool if I make a mistake. And so you saw some of that working through the working through the system, especially in a project.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Now all of this, our orders 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 gonna accommodate the tariffs and people are gradually coming, as they did with the pandemic. That's what happened to the pandemic.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

At first, people panic. You know? Yeah. Everything started to work out just you can see in the pandemic.

[Gary Prestopino, Managing Director at Barrington Research Associates]

Thank you very much for that.

[Operator]

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

[Christopher Glynn, MD & Senior Analyst at Oppenheimer Holdings]

Thanks. Yes, a lot on that last topic, but just maybe a little follow-up. 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 span APAC and Europe.

[Christopher Glynn, MD & Senior Analyst at Oppenheimer Holdings]

So just wanted to clarify if that motion really spanned all those categories.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

No, what I was talking about, maybe a little bit in Europe, Asia is kind of a different deal. Asia is gonna take a lot longer to deal with, I think, because you got those, just what I said, mean, they've got the political turbulences in a bunch of different places And you got China, which is a basket case. China's really screwed up. And so you got all that stuff in Asia. And on top of which you got the cross border flows, which everybody's trying to figure out what to do, including us.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

We're not taking tariffs, but we gotta figure out what to do with our plants in China. If we don't wanna use them in The United States and we sell in Asia, so we gotta just 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 discussion, really about the critical industries business and their project based businesses. That's what I was talking about.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

When we talk about, Chris, when we say that we exited the quarter stronger than when we entered, we kind of mean the tools group as well. We mean and in fact, we do mean the tools as well. We're actually talking about C and I and the tools group. But at C and I, it's most pronounced in the industrial business, which by the way, is the big Kahuna engine in the C and I business.

[Christopher Glynn, MD & Senior Analyst at Oppenheimer Holdings]

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

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Sure, we got a bunch of stuff looking at. I mean, I think you can see, it's no secret that we have a pretty large landscape or landscape of acquisitions that we look at constantly. And 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 gonna happen there. And so you're talking about the expanding the repair shop owners and managers or extending the critical industries.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Those are the areas you look in more or less. And we're looking at several places, 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 wanna be pretty careful. Don't wanna acquire something and wake up and figure out, woah, the tariffs aren't looking so good for these guys. So you wanna be more careful and due diligence.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

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 that 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.

[Christopher Glynn, MD & Senior Analyst at Oppenheimer Holdings]

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

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

I don't think there's any of that. Actually, our prices were pretty normal. You know, we might've had a little more pricing in Canada than normal, maybe, you know, because of the situation there. We can always price if we get if we have tariff problems and, you know, so but generally, we're resistant to that stuff. You might see some of that in Canada, but and and Canada actually were okay in the quarter, so that wasn't afflicted.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

I don't think I don't I think you saw it. I mean, I think the international business is kinda mixed, and so that was flat. I think the big news is US up, and that was driven by the pivot. The hand tools were pretty successful. And and and the diagnostics business is pretty successful.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

So those two things made made hay in the situation, and we like that idea. And I think, you know, we felt, you know, if you look at the structure of the quarter for the tools group, we we exited stronger. That's simply it. That's no prediction. I've already said that the third quarter is squarely, you know, but generally, I like the direction we're going there.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

It seems like and and I think it's simple as this. We've been pivoting. We're getting better at it, but but the uncertainty has kinda stabilized. So if the uncertainty stabilizes, every month, we gain ground on it with the pivot. Every month.

[Christopher Glynn, MD & Senior Analyst at Oppenheimer Holdings]

Great.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Sure.

[Christopher Glynn, MD & Senior Analyst at Oppenheimer Holdings]

Thanks for all that.

[Operator]

The next question will come from Scott Stember with ROTH. Please go ahead.

[Scott Stember, Executive Director & Senior Research Analyst at Roth Capital Partners, LLC]

Good morning and thanks for taking my questions as well.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Good morning, Scott.

[Scott Stember, Executive Director & Senior Research Analyst at Roth Capital Partners, LLC]

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?

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Yes. Look, I think they're about the same. I think the sales off the van were a little little bit lower, you know, but that would be expected when you have the kinda you know, I've described you exiting stronger than when you entered. So that would mean it takes time for stuff to get through the van and to so therefore, you would have that kind of an effect naturally. Generally, we haven't seen turbulence.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

We haven't seen in all this turbulence really much variation for a look, if you look at bigger periods. A quarter is a kind of blip in that kind of view. You know what I mean? It depends on what's launched, when it's launched, when it hits our vans and then when it And so it's a lot of things like that. So I I I think they're pretty much in balance this time.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Yeah. As I said, the actual numbers are a little lower, but that would be natural expectation given how we've described how the quarter went.

[Scott Stember, Executive Director & Senior Research Analyst at Roth Capital Partners, LLC]

Got it. And then you talked about some of these higher ticket items or less expensive higher ticket category sales that you're seeing. What was the

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

I'm moving rolling out of the experience. That's right.

[Scott Stember, Executive Director & Senior Research Analyst at Roth Capital Partners, LLC]

Was diagnostics the leader in tools in the quarter?

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

No. Hand Tools was the leader. Tools was the leader. But hand tools, that's why I spent so much time talking about hand tools because the hand tools are great.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Those pliers are great. The pull forward pliers, unbelievable. The strength of those things, Milwaukee is probably one of the only places in the world that can do that. So we really like that kind of thing. And I'd say 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 but it's a lot it's important to the techs and they're they're liking some of the stuff we're bringing out.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Now diagnostics did pretty well. Don't get me wrong. The Triton was stupendous, but to storage down, you know, and stuff like that. Every quarter there's a new story about the products. I think generally though, the big thing is the overall number.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

And I don't wanna 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 transaction. Think about that one for a minute. And you see that, boy, that that just lays out what we did what we're doing. We're doing okay. We're winning the battle at the at the at the point of sale, and we're but since sales are a little aren't are flattish, we're still spending more because we wanna keep building our advantage in product and brand and people.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

We're hiring a lot. We hired more engineers than ours and I. No kidding. Their margins have been up 12 over the past thirteen quarters.

[Scott Stember, Executive Director & Senior Research Analyst at Roth Capital Partners, LLC]

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

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

I'm not I swore I was not going to do that because I think no, I'm not going to do that. It's hard for We can make changes every day and mitigate. And the thing is every day something new comes up. I got somebody, Scott, who every day writes a paper on what comes out of Washington and we have to review it because the tariffs are always changing. Your guess is as good as mine.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

So we have to we have to move with alacrity against it. So it's impossible to predict. And and all I can tell you is I like our position versus any of that stuff. Our position is pretty good. We we make in the markets where we sell.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Now we do have some exposures. We gotta resist. But we know how to make everything almost everywhere.

[Scott Stember, Executive Director & Senior Research Analyst at Roth Capital Partners, LLC]

Got it. That's all I have. Thanks again.

[Operator]

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

[David Macgregor, President at Longbow Research]

Good morning, everyone. Congrats on the progress, Nick.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Thanks.

[David Macgregor, President at Longbow Research]

Hey, good morning. I guess just on the C and I business, you talked about the project delays and how that led to some order backlog. Just talk about the timing of that realizations there. Are those projects that now that people maybe are feeling a little 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?

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

No, no, look, I think this, I think it's hard to get everything in all the nuances. But in reality, I was talking about delays, you know, people didn't pull a trigger. And I'm also talking about the orders impacting us kept going and doing that order. So it didn't pull back on ordering so much as they put, you know, on delays and projects we expect to go. I don't I don't know about that.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

I think it I do think things we exited the business stronger than when we entered, And that's an important factor. It's hard for me to predict the structure or or I guess the the the slope of that curve. You know, it's hard for me 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 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 it's sort of like all of us in business, like, you know, you know, things start to happen and you you know, the waves are going up and down and you figure out how to navigate the waves after a while.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

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 gonna happen. I think we're sanguine about it, but I can't predict anything like that. I do think that business is strong, though, anyway.

[David Macgregor, President at Longbow Research]

It sounds like it.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Despite the numbers despite the numbers this quarter.

[David Macgregor, President at Longbow Research]

Let me ask you about the tools business. 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 I think is that still something

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

if you looked at our numbers over twenty years, you'll find that that's kind of what we've done, you know, and the profitability but the profitability is going up regularly. And that's really been the secret to Snap on. We've been growing in the range we said over quite a long period of time. You know, there's ups and downs, and our profitability is moving upwards. And so I I do think the tools business sees that kind of thing.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

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 I'm pretty confident about the tools business. I think Yeah. You know, when I talk to the franchisees, they seem pretty happy.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

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 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.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

And Yep. But I have no doubt that it's gonna go upwards.

[David Macgregor, President at Longbow Research]

Let me just go back to a previous question about cash and capital allocation. And you talked about the m and a funnel look good. But historically, you've been I mean, you've done smaller transactions. Snap on stayed away from large acquisitions. I mean, you've got a net cash balance sheet.

[David Macgregor, President at Longbow Research]

You've strong free cash flow prospects, maybe $1,000,000,000 annually. You just completed a large capacity build out program. You're not a particularly large share repurchase, sir, 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,

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Look. I think well, I still think we're in a uncertain 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.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

And I do believe I know you we do believe we, 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 is it's been a little bit flawed. But we're not afraid to acquire anything big.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Our management team is quite capable. The only thing is I'm telling you, we won't acquire anything that's transformative. We'll acquire things that's consistent with our coherent growth model. And we do think there are things out there as they became available, just haven't been available. I I don't it's that.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

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.

[David Macgregor, President at Longbow Research]

Good. That's it for me. Thanks very much.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Okay.

[Operator]

The next question will come from Bret Jordan with Jefferies. Please go ahead.

[Bret Jordan, Managing Director at Jefferies LLC]

Hey, good morning,

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Good morning.

[Bret Jordan, Managing Director at Jefferies LLC]

On the 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?

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Look, I don't know. Look, I'm not sure. I think though that collision might come under the group.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

A lot of it is the you know, as you're mister collision, you know this probably better than I do, you know, but but the thing is you got a lot of those big multi store operators that have been building up. And our our view of the world is they got a little spooked lately. And 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 that's what our grassroots kinda says, you know.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

And so we gotta believe that's a factor. I think that's in collision. That's the 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.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

There was a lot of movement and maybe you're talking about people not so much spoof that saying, okay, I'm going to consolidate. I'm going to consolidate my gains for a while and then start to move on. I don't know, we'll see what happens.

[Bret Jordan, Managing Director at Jefferies LLC]

Okay. And then a question, I guess, as far as the franchise event outlook, I mean, a slightly harder comparison on Q3 against a pretty strong franchise event last year. Any color as far as like what the attendance is looking like? I mean, it's coming up in a month or so.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

I just I don't know. You know?

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

I look. This is our 250. So two thousand yeah. A hundred and fifth anniversary. Two hundred what am I talking?

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

A hundred and fifth. And I think maybe it could be a little bit bigger. I don't know, we'll see what happens. We kind of are planning for it to be slightly bigger, but it is last year was in Orlando and this year it's in Orlando for a number of reasons. So you never know how that's gonna go over, but we expect a pretty robust as robust as last year looking now.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

You never know, Brett, until the last few weeks, because a lot the votes come in at the last few weeks. It's like waiting for, like an annual meeting, a lot of the votes come in in the last day. So that kind of thing. I do think it'll be pretty robust. Now having said that though, the SFC, you know, it's great.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

You know, you like that, it's always enthusiastic. You can't go away from the SFC without feeling good about Snap on, but the order it's only orders, you know, and so when whatever happens at the SFC, you gotta realize it's only orders and therefore it has to play out real and real sales. Getting high orders are better than getting a stick in the, the eye, a sharp stick in the eye, but they're not definitive, not fully definitive, they're just directional.

[Bret Jordan, Managing Director at Jefferies LLC]

Alright. Great. Thank you. Appreciate it.

[Nicholas Pinchuk, Chairman & CEO at Snap-on]

Okay.

[Operator]

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

[Sara Verbsky, VP - IR at Snap-on]

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]

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

Participants

Executives

• Nicholas Pinchuk, Chairman & CEO

Analysts

• Sara Verbsky, VP - IR at Snap-on
• Aldo Pagliari, SVP - Finance & CFO at Snap-on
• Luke Junk, Senior Research Analyst at Robert W. Baird & Co
• Gary Prestopino, Managing Director at Barrington Research Associates
• Christopher Glynn, MD & Senior Analyst at Oppenheimer Holdings
• Scott Stember, Executive Director & Senior Research Analyst at Roth Capital Partners, LLC
• David Macgregor, President at Longbow Research
• Bret Jordan, Managing Director at Jefferies LLC