Snap-on Q3 2021 Earnings Call Transcript

Quartr
Provided by Quartr
October 20, 2021

There are 10 speakers on the call.

Operator

Good day, and welcome to the Snap on Incorporated Third Quarter 2021 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Sarah Furbsky, Vice President, Investor Relations. Please go ahead.

Speaker 1

Thank you, Olivia, and good morning, everyone. Thank you for joining us today to review Snap on's 3rd quarter results, which are detailed in our press release issued earlier this morning. We have on the call today Nick Pinchuk, Snap on's Chief Executive Officer and Aldo Pagliari, Snap on's Chief Financial Officer. Nick will kick off our call this morning with his perspective on our performance. Aldo will then provide a more detailed review of our financial results.

Speaker 1

After Nick provides some closing thoughts, we'll take your questions. As usual, we have provided slides to supplement our discussion. These slides can be accessed under the Downloads tab in the webcast viewer as well as on our website snapon.com under the Investors section. These slides will be archived on our website along with a transcript of today's call. Any statements made during this call relative to management's expectations, estimates or beliefs Or otherwise, State's 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.

Speaker 1

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?

Speaker 2

Thanks, Sarah. Good morning, everybody. As usual, I'll start the call by covering the highlights of our Q3 and along the way, I'll give you my perspective on our results. They are encouraging. On our markets, they are positive and more than resilient.

Speaker 2

And I'll speak about our progress. It's been considerable. Each period is demonstrating increasing strength even when in the midst of seldom seen headwinds. And we'll also speak about what it all means for our future. It's Incredibly promising.

Speaker 2

And then Aldo will move into a more detailed review of the financials. Our reported sales in the quarter were 1,000,000,000,37,700,000 They were up 10.2%, including 9.6 percent $9,600,000 of favorable foreign currency and $19,500,000 of Our organic sales growth was up 7%, was 7%, gains in every group. It was our 5th straight quarter of above pre pandemic performance and Snap on value creation processes, safety, quality, customer connection, innovation And Rapid Continuous Improvement or RCI as we call it, all combined to drive that progress. And progress it was. OpCo operating income of 201 $3,000,000 was up $15,600,000 from last year.

Speaker 2

The OI margin was 19.4%, down 30 basis points Impacted negatively by acquisitions, but still very strong at a strong level. For Financial Services, operating income of $70,600,000 increased 7.6 Percent and the delinquencies were down even below the 2019 pre pandemic levels, A continuing testimony to our unique business model and its ability to navigate the most threatening of environments. 1st quarter EPS was $2.57 up $0.29 or 8.8 percent from last year. And as I said before, we believe Snap on is stronger now than when we entered this great withering. And our Q3 results testifies to just that.

Speaker 2

Compared with 2019, before we ever heard of the virus, our new sales our sales grew $135,900,000 or 15.1 percent, which includes $21,000,000 from acquisition related sales, dollars 13,600,000 of favorable foreign currency and $101,300,000 And a $101,300,000 or 11.1 percent organic gain. And that 2021 OpCo operating margin of 19.4 percent was up 80 basis points from the pre pandemic levels, even while absorbing the impact of the new acquisitions And while meeting what we could call a considerable disruption of these days. Now let's talk about the markets. Water repair remains quite resilient. The technicians are prospering.

Speaker 2

They know they've weathered the depths of the COVID shock, Learn to accommodate the virus environment and are well along to psychological recovery. Techs are resilient. They've been at their post for the last 18 months undaunted and they won't be shocked again. And they are optimistic about the future of their profession, about the outlook of individual transportation And about the greater need for their skills as the vehicle part changes with new technology. Vehicle repair is a strong And resilient market, you can hear it in the franchisees voice and you can see it written clearly across our numbers every quarter.

Speaker 2

Also on auto repair, there are shop owners and managers different from the techs. That's where our repair systems and information group, RS and I, flies its trade. Demand for new and used cars is high despite limited supply and dealership prepared maintenance and warranty is rebounding and dealers are starting to invest again. And we've been able to make we've been able to take advantage with groundbreaking products like our award winning 2 point advanced driver assistance calibration system, Our new diagnostic, our new diagnostic Triton D10 intelligent diagnostic unit and our acclaimed Mitchell 1 ProDemand repair estimating guide, All representing new technologies and data deployed to make work easier in the shop. Vehicle repair looks more promising than ever And Snap on is poised to capitalize.

Speaker 2

Now let's talk about critical industries where Snap on rolls out of the garage, solving tasks of consequence. This is where commercial industrial or C and I operates. The virus had a much longer impact on these customers. They were slower to accommodate, But they are recovering. And in the quarter, our results showed that trend, gains in North America, Europe and in Asia, all over the globe.

Speaker 2

So overall, I describe our C and I markets as improving and coupled with the strength of the auto repair sectors, our markets are beyond resilient And we're ready and well positioned to make progress along those runways of color. At the same time, It's clear that we have ongoing potential on our runways for improvement. The Snap on value creation processes, they've never, Never been more important helping to counter the turbulence of the day, especially important was customer connection and understanding the work of professional technicians and innovation, Matching the app insight with technology, driving new products. And just this quarter Snap on was prominently represented with 9 Professional tool and equipment news, we call it P10, People's Choice Awards, where the actual users, the technicians make the selection. We're also recognized with 2 P10 Innovation Award We're honored with 2 Motor Magazine Top Tool Awards, an essential driver of Snap on Growth is innovative product that makes work easier and the awards Hard one are a testimony that great Snap on products just keep coming, matching the growing complexity of the task, becoming more essential to technicians and driving our forward progress.

Speaker 2

That's the environment, pretty positive. Now we'll move to the operating groups. In C and I, volume in the quarter rose 13.9 percent or $42,000,000 versus 2020 on significant growth across all divisions, Reflecting a 32 it reflected a $32,900,000 or 10.6 percent organic uplift and $7,500,000 from our Autocrib acquisition And double digit growth in our European hand tool businesses and a high single digit rise in critical industries led the way. C CI operating income of $53,600,000 was up $10,500,000 or 24.4 percent And the operating margin was 15.3%. That's an increase of 130 basis points versus last year.

Speaker 2

I'd say that's an attention getting rise against the wind. Now, compared to the pre pandemic 2019 results, sales were up 4.8%, Including a 0.9 percent organic gain and that OI margin of 15.3% was up 90 basis points against the 70 point Impact of acquisitions and unfavorable currency. Once again, SNA Europe delivered double digit growth beyond pre Double digit growth beyond pre virus levels against a complex and varied marketing environment propelled by the customization power of their Back over to a management system and our industrial division rose in critical industries, recording nice gains in general industry, heavy duty education and U. S. Aviation, A number of positive sectors overcoming weakness and continuing weakness in the military and natural resources.

Speaker 2

C and I is rising and we're enthusiastic about the possibilities. We'll keep strengthening our position to capture those opportunities and enabling that intent is our expanding lineup of Innovative new products. And the 3rd quarter did see some great new offerings like our 14.4 volt 3eight inches drive brushless or action. The CTR at 61, It's already popular. And it's no wonder.

Speaker 2

It's a powerful combination of strength and speed, high torque, 60 foot pounds to bust loose very stubborn bolt And Rapid Operations, 275 RPM for getting those fasteners off in QuickTime. It's made in our Murphy, North Carolina plant and It features a full frame brushless motor for longer run time and durability. It includes a safety switch that shuts down shuts down the tool after 2 minutes of continuous use that's eliminating the chance of overheating. It also has a super bright 18 lumen front facing light that stays illuminated after The trigger is released allowing easy and immediate inspection of the work. This ratchet also features a built in brake that stops the tool from throwing our Fasteners, which is it seems like not much, but it's an important safety feature for technicians.

Speaker 2

And it also offers a great Cushion grip that makes for more comfortable tool control even during extended use. The CTR-eight sixty one power, speed and comfort, It's in a very compact package. It's a mighty might for accomplishing critical tasks and the professionals love it. Well, that's C and I continuing upward, exceeding pre pandemic volumes, strong profitability and positioned for more. Now on to the Tools Group.

Speaker 2

Sales of $471,400,000 up 21,800,000 Including $4,900,000 of favorable currency and a $16,900,000 or 3.7 percent organic gain. Growth in the U. S. Both in the U. S.

Speaker 2

And the international operations and the operating margin was 20.8%, one of our highest effort and up 140 basis points from last year. Compared with the pre virus 2019 level, the organic gain was 80,400,000 20.6 percent and the 20.8 percent operating margin was up 700 basis points compared with the pre pandemic level, 700 Basis points in the midst of operating turbulence. Tools Group is responding to the challenges of the day, Increasing its product advantage, fortifying its brands and further enabling its franchisees, giving them more selling capacity. It's all working. 5 strong quarters of above pre pandemic performance says it so.

Speaker 2

The 3rd quarter is when we hold our most of you know this, the 3rd quarter is when we hold our annual Snap on Franchisee Conference or SSC. This year, we're back again in person at the Gaylord in Orlando, Florida. Over 9,000 attendees, a record. We had training seminars And sales growth in Intelligent Diagnostics, they were well attended and well received. And we had several football fields of products, so our franchisees Could get up close and personal with our latest innovations.

Speaker 2

For the franchisees, the SFC is an opportunity for learning, For touching and ordering new products and for recharging their Snap on batteries and believe me, they are charged. For the company, the SFC is an opportunity to gauge the franchisees outlook on the business. One quantitative way is orders. Well, they were up strong double digits over last year's virtual Live from the Forage event and from the 2019 SFC Live in Washington, D. C.

Speaker 2

And when I say up, I mean all of our product categories showed substantial gains over both of those events. So that's the quantitative look at it. Qualitatively, I spoke with many of our franchisees and I can attest that they were beaming, Showing a lot of confidence in our business and declaring considerable optimism on their future days decades ahead with Snap on. We do believe our franchisees Are continuing to grow stronger each quarter and we continue to invest in our future. And if you were with us in Orlando, You would have seen it unmistakably.

Speaker 2

And we are investing, building franchisees ability to use the direct interface with technicians, Enabling them to better communicate their unique capability and growing technology of Snap on product lines. We have great confidence in the power of our products And there are real reasons for the conference. You heard about the product awards. Well, beyond that, there's a continuous stream of terrific new offerings. During SFC, the Tools Group unveiled its new KHP415 Portable 40 inches substation Power Card.

Speaker 2

It's targeted at entry level technicians, the ones working on a narrow scope of repairs. It's built in our Almona, Iowa factory And the new card enables young mechanics to invest in step on storage at a value price, while at the same time getting some very attractive professional features, A lockable comp compartment, 4 full drawers of storage, an adjustable power tool rack that holds up to 10 tools and a power strip with 5 outlets and 2 USB ports For battery and device charging, new car, it was well received. And it's quickly reaching what we call hit product status Over $1,000,000 of sales, it's racing upward on a steep trajectory. Beyond products, We spent time working to expand franchisees selling capacity, harnessing social media, improving product training and RCI ing the van operations and it's working. Selling capacity is up and you can see it clearly in the 5 straight gangbuster quarters for our van network.

Speaker 2

The Tools Group is on a very positive trend, Ascending and leaving pre pandemic levels way behind. Now on to RS and I. Sales were up 14.8 percent or $46,900,000 including a 31,700,000 Or 9.9 percent organic uplift. Growth was weighted toward the Undercar Equipment, but our Diagnostics and Information businesses also Chipped in with double digit increases. Versus 2020 RCI operating earnings were $83,300,000 representing a rise of 3,200,000 Comparing with 2019 sales grew $41,700,000 or 12.9 percent including $24,200,000 or a 7.4% Organic grain, nice growth.

Speaker 2

The RS and I OI margin was down versus the last 2 years, attenuated by business mix, acquisitions and currency, but it was still a strong 22.9%. We clearly see the potential of our runways with RS and I, Expanding Snap on's presence in the garage with coherent acquisitions and a growing line of powerful products. 3rd quarter annual growth was broad based, but a strong double digit rise in undercar equipment was an especially welcome turn. That's a nice turnaround and it was led by innovative products like our 15 ks 4 Post Alignment Lift. It's really taken a hold in the repair shops As I've resumed investing, this new 15 ks provides professional grade alignment lifting for a variety of vehicle sizes with open front columns, Best in class ultra wide 26 inches runways and integrated 100 inches long rear plates.

Speaker 2

It's suited to accommodate vehicles from compact passenger cars, Compact passenger cars to big pickup trucks and it's low easy on approach angle makes it great even for low profile sports cars That are often a challenge for other lifts made in our Louisville, Kentucky plant on an assembly line it's made in our Louisville, It's like a plan on assembly line I'm very familiar with. I participated in an RCI event for that process. Our new 15 ks has Help drive the recovery for undercar equipment and it's driven the rise in RS and I volumes. We're quite positive about RSI's Possibilities with repair shop owners and managers as the vehicle industry evolves, it's got a great future. So that's the highlights of our quarter.

Speaker 2

Continued and strong progress. Our 5th straight period exceeding pre pandemic levels. C and I on track with strong sales and interest And increasing profitability, RS and I, Undercar coming back, Tools Group strong, pumped and moving vertically, the credit companies solid in the storm and profitable, The overall corporation organic sales rising 7%, OpCo operating margin 19.4% and EPS $3.57 a considerable rise and most important, more testimony that Snap on has emerged from the turbulence much stronger than we entered. It was an encouraging quarter. Now I'll turn the call over to Aldo.

Speaker 2

Aldo?

Speaker 3

Thanks, Nick. Our consolidated operating results are summarized on Slide 6. The Q3 of 2021 exhibited another period of solid performance. The results also compared favorably with the Q3 of 2019, which being a pre COVID-nineteen time period, In some cases, may serve to be the more meaningful baseline. Net sales of $1,000,000,000,37,700,000 in the quarter increased 10.2% from 2020 levels, reflecting a 7% organic sales gain, dollars 19,500,000 of acquisition related sales and $9,600,000 of favorable foreign currency translation.

Speaker 3

Additionally, net sales in the period increased 15.1% from 9 $1,800,000 in the Q3 of 2019, including an 11.1% organic gain, $21,000,000 of acquisition related sales and $13,600,000 of favorable foreign currency translation. Consolidated gross margin of 50.2 percent improved 30 basis points from 49.9% last year. The gross margin contributions from the higher sales volumes, 60 basis points of favorable foreign currency effects and benefits from the company's RCI initiatives more than offset higher material and other costs. Operating expenses as a percentage of net sales of 30.8 percent increased 60 basis points from 30.2% last year, primarily due to 60 basis points of unfavorable acquisition effects. Benefits from the higher sales volumes were offset by increased brand building, Travel and other calls, including the restoration of our annual in person Snap on Franchisee Conference.

Speaker 3

Operating earnings before Financial Services of $201,300,000 compared to $185,700,000 in 20.20 $167,700,000 in 20.19, reflecting an 8.4% and a 20% improvement, respectively. As a percentage of net sales, operating margin before Financial Services of 19.4% compared to 19.7% last year and 18.6% in 2019. Financial Services revenue of $87,300,000 in the Q3 of 2021 compared to $85,800,000 last year, While operating earnings of $70,600,000 increased $5,000,000 from 20.20 levels, reflecting the higher revenue as well as lower provisions for credit Consolidated operating earnings of $271,900,000 increased 8.2% from $251,300,000 last year and 18.9 percent from $228,700,000 in 20.19. As a percentage of revenues, the operating earnings margin of 24.2% Compared to 24.5 percent in 2020 23.2 percent in 2019. Our 3rd quarter effective income tax rate of 23.7% compared to 23.4 percent last year.

Speaker 3

Net earnings of $196,200,000 or $3.57 per diluted share Increased $16,500,000 or $0.29 per share from last year's levels representing an 8.8% increase in diluted earnings per share. As compared to the Q3 of 2019, net earnings increased to $31,600,000 or $0.61 per share, representing a 20.6% increase in diluted earnings per share. Now let's turn to our segment results. Starting with the C and I Group on Slide 11. Sales of $351,400,000 increased 13.9% from $308,400,000 last year, reflecting a 10.6 percent organic sales gain, dollars 7,500,000 of acquisition related sales and $2,600,000 of favorable foreign currency translation.

Speaker 3

The organic gain reflects higher activity in all of the segment's operations And includes high single digit increases in sales to customers in critical industries. Within the critical industries, year over year sales gains were achieved in general industry, Heavy duty and technical education, but were partially offset by declines in sales to the military and international aviation, both of which had particularly robust sales in the prior year period. As a further comparison, Net sales in the period increased 4.8 percent from 2019 levels, reflecting a $3,000,000 organic sales gain, dollars 7,500,000 of acquisition related sales $5,600,000 of favorable foreign currency translation. As compared to 2019, sales in our European based hand tools business were up mid teens. With respect to critical industry sales activity in that period, our lower sales to the Military, International Aerospace and Natural Resource segments Offset gains in our sales to technical education, heavy duty and general industry customers.

Speaker 3

Gross margin of 38 point 2% improved 90 basis points from 37.3% in the Q3 of 2020. Contributions from the higher sales volumes and benefits from RCI initiatives We're partially offset by higher material and other costs. Operating expenses as a percentage of sales of 22.9% improved 40 basis points as compared to last year, primarily due to the improved volumes, which were partially offset by higher travel and other costs. Operating earnings for the C and I segment of $53,600,000 compared to $43,100,000 last year, the operating margin of 15.3% compared to 14% a year ago. Turning now to Slide 8.

Speaker 3

Sales on Snap on Tools Group of $471,400,000 increased 4.8 percent from $449,800,000 in 2020, reflecting a 3.7 percent organic sales gain And $4,900,000 of favorable foreign currency translation. The organic sales increase reflects a mid single digit gain in our U. S. Business and a low single digit gain in our international operations. Net sales in the period increased 22.4% from $385,200,000 In the Q3 of 2019, reflecting a 20.6 percent organic sales gain and $5,800,000 of favorable foreign currency translation.

Speaker 3

Gross margin of 45.8 percent in the quarter improved 30 basis points from last year, primarily due to the higher sales volumes and 130 basis points from favorable foreign currency effects, which offset higher material and other costs. Operating expenses as a percentage of sales of 25% improved from 26.1% last year, primarily reflecting the higher sales. Operating earnings for the Snap on Tools Group of $98,200,000 compared to $87,100,000 last year. The operating margin of 20.8% compared to 19.4% a year ago, an improvement of 140 basis points. Turning to the RS and I Group shown on Slide 9.

Speaker 3

Sales of $364,400,000 compared to $317,500,000 a year ago, Reflecting a 9.9 percent organic sales gain, dollars 12,000,000 of acquisition related sales and $3,200,000 of favorable foreign currency translation. The organic increase reflects double digit increases in sales of undercar equipment and in sales of diagnostic and repair information products To independent shop owners and managers, while activity focused on OEM dealerships was essentially flat. As compared to 2019 levels, Net sales increased $41,700,000 from $322,700,000 reflecting a 7.4% organic sales gain, $13,500,000 of acquisition related sales and $4,000,000 of favorable foreign currency translation. Gross margin of 46.8 percent declined from 47.3% last year, primarily due to the impact of higher sales and lower gross margin businesses, Increased material and other costs and 10 basis points of unfavorable foreign currency effects. These declines were partially offset by savings from RCI initiatives and 60 basis points of benefits from acquisitions.

Speaker 3

As a reminder, Undercar Equipment, which had healthy sales increases in the quarter, Typically has a gross margin rate that is below the RS and I segment's average. Operating expenses as a percentage of sales of 23.9 percent increased 180 from 22.1 percent last year, primarily due to 170 basis points of unfavorable acquisition effects. Operating earnings for the RS and I Group of $83,300,000 compared to $80,100,000 last year. The operating margin of 22.9% compared to 25.2 percent a year ago. Now turning to Slide 10.

Speaker 3

Revenue Financial Services of $87,300,000 compared to $85,800,000 last year. Financial Services operating $70,600,000 compared to $65,600,000 in 2020. Financial Services expenses of $16,700,000 decreased $3,500,000 from 2020 levels, primarily due to lower provisions for credit losses resulting from favorable loan portfolio trends, which support lower forward looking estimated reserve requirements. As a percentage of the average portfolio, financial services expenses were 0.8% at 0.09 percent in the 3rd quarters of 2021 2020 respectively. In the 3rd quarters of both 2021 2020, The average yield on finance receivables was 17.8%.

Speaker 3

The respective average yields on contract receivables were 8.5% and 8.4% respectively. Total loan originations of $269,300,000 in the 3rd quarter Increased $16,500,000 or 6.5 percent from 2020 levels, reflecting a 5.7% increase in originations of finance receivables And a 9.5% increase in originations of contract receivables. Moving to Slide 11. Our quarter end balance sheet includes approximately 2 point $2,000,000,000 of gross financing receivables, including $1,900,000,000 from our U. S.

Speaker 3

Operation. Our worldwide gross financial services portfolio increased $7,500,000 in the 3rd quarter. The 60 day plus delinquency rate of 1.4 percent for U. S. Extended credit compared to 1.5% in the Q3 of 2020 and 1.7% in the Q3 of 2019.

Speaker 3

On a sequential basis, the rate is up 20 basis points, reflecting the typical seasonal increase of 20 to 30 basis points we experienced between the 2nd and third quarters. As it relates to extended credit or finance receivables, trailing 12 month net losses of $42,700,000 Represented 2.48 percent of outstandings at quarter end, down 22 basis points as compared to the same period last year. Now turning to Slide 12. Cash provided by operating activities of $186,400,000 in the quarter Reflects 92.5 percent of net earnings. While this represents a decrease of $37,600,000 from 2020 levels, this cash conversion rate Compares favorably with 77.5 percent of net earnings in both the 3rd quarters of 2019 2018.

Speaker 3

The decrease from the Q3 of 2020 primarily reflects the higher net earnings being more than offset by net changes in operating assets liabilities including a $61,900,000 increase in working capital. This change in working capital is largely driven by the more typical Seasonal inventory build in the Q3 of 2021 as compared to the reduction of inventory experienced in the period last year. Inventory additions also reflect some increases in buffer stocks and higher levels of in transit inventories associated with the supply chain dynamics being seen in the macro environment. Net cash used by investing activities of $29,700,000 included net additions of finance receivables of $7,600,000 and $16,200,000 of capital expenditures. Net cash used by financing activities of $385,800,000 included $250,000,000 in senior note repayments, cash dividends of $66,300,000 and the repurchase of 300,000 shares of common stock For $66,500,000 under our existing share repurchase programs.

Speaker 3

As of quarter end, we had remaining availability to repurchase up to an additional $197,100,000 of common stock under existing authorizations. Turning to Slide 13. Trade and other accounts receivable increased $12,500,000 from 2020 year end. Days sales outstanding of 56 days compared 64 days of 2020 year end. Inventories increased $43,100,000 from 2020 year end.

Speaker 3

On a trailing 12 month basis, Inventory turns of 2.7 compared to 2.4 at year end 2020. Our quarter end cash position of $735,500,000 Compared to $923,400,000 at year end 2020. Our net debt to capital ratio of 10.3% compared to 12.1 percent at year end 2020. In addition to cash and expected cash flow from operations, We have more than $800,000,000 in available credit facilities. As of quarter end, there were no amounts outstanding under the credit facility and there were no commercial paper borrowings outstanding.

Speaker 3

That concludes my remarks on our Q3 performance. I'll now briefly review a few outlook items for the balance of 2021. We now forecast that capital expenditures will approximate $90,000,000 In addition, we currently anticipate absent any changes to U. S. Tax legislation That our full year 2021 effective income tax rate will be in the range of 23% to 24%.

Speaker 3

I'll now turn the call back to Nick for his closing thoughts. Nick?

Speaker 2

Thanks, Aldo. The Snap on Third Quarter can be summarized in one word, Almost across the board with auto repair, the most advanced going beyond resilience. We saw the COVID-nineteen playing out with our customers in 3 phases shock, Interruption in the face of virus uncertainty, a combination of gradual learning to pursue essential work while staying safe And psychological recovery, a confidence in the future and a return to normal buying. But now we're seeing a 4th phase, Exhilaration, a certainty that we're moving sharply to higher levels, ignited by the conviction that we have met and managed the virus And that we won't get shocked again. It's a bright outlook and Snap on with continuing investment in product and brand and in people is well positioned To surf that trend, of course, the COVID is still lingering and its side effects inflation and supply disruption are on the loose, But Snap on is strongly arrayed to engage those challenges.

Speaker 2

Our direct selling model and strong brand position enables agile pricing. Our vertical integration and shorter supply chains make us less vulnerable to sourcing viscosities. Our broad product line, more than 80,000 SKUs supports Flexible marketing to guide around shortages and our RCI culture drives cost offsets. We found opportunities on our runway for growth and improvement even amidst these challenging times and you can see that in the numbers, encouraging. C and I sales up from both from last year 2019.

Speaker 2

OI margin 15.3% strong and rising 130 basis points 90 basis points Versus 2020 2019 respectively. RS and I up organically 9.9% versus last year and 7.4% beyond the pre pandemic levels. OI margins of 22.9 percent and the Tools Group organic volume rising 3.7% versus last year's record level And up 20.6% versus the days before the virus. OI margin, it was 20.8%, up 140 basis points from last year and up 700 basis points from 2019. It all led to our corporation being organically up 7% compared with last year and a Strong 11.1 percent versus pre pandemic numbers.

Speaker 2

Overall, OI margin was 19.4%, Solid in the face of turbulence and our credit company navigating the uncertainty without disruptions. Profit is up, delinquencies down. And EPS $3.57 rising emphatically versus all comparisons. We have emerged from the virus stronger than when we entered and the numbers can We've now recorded 5, 5 straight quarters above pre pandemic performances and we believe that with our markets Reaching beyond resilience to exhilaration with the capabilities of our model to overcome the challenges of the environment and with a considerable advantage nurtured by our Continuing investment in product, brand and in people will continue to rise, maintaining our upward trajectory through the end of this year and well beyond. Now before I turn the call over to the operator, I want to speak directly to our franchisees and associates.

Speaker 2

I always know you're listening. This is a period of great momentum for SABLion. You are the fuel that has ignited and fan that drive forward and upward. For your success in creating this encouraging performance, you have my congratulations. For the capabilities you bring to bear in achieving our progress every day, You have my admiration and for your commitment to our present and your confidence in our future, you have my thanks.

Speaker 2

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

Operator

Thank you. Our first question is coming from Christopher Glynn with Oppenheimer. Please go ahead.

Speaker 4

Hey, thanks. Good morning.

Speaker 2

Good morning, Chris.

Speaker 4

So Snap on Tools looked really Good sequentially. It was usually down about 5% seasonally. I think it was down about half that suggests Little incremental commercial execution taking place. Wondering if you think I'm looking at that a little too closely or How you might characterize that?

Speaker 2

Well, I think look, I think we're they're certainly on an upward trajectory. So that would include Better sequential performance. I think that's quite true. We're pretty as I've used many times in my comments, we're encouraged by this performance And they seem to be rising. If you look at pre pandemic levels, which the appropriate comparison up big And their operating margins are strong.

Speaker 2

And this is a turbulent time and they're managing over it and doing well.

Speaker 4

Okay. And curious that you talked about vertical integration and shorter supply chain that's clearly a characteristic, but Probably not necessarily for every product you have. So I'm wondering if you did kind of have kind of a general Kind of quantification of any revenue gaps in the quarter that created some backlog build given the widespread Dynamics of Yes.

Speaker 2

Not that I can put my finger on. Look, I mean, the thing is the place you would expect to see that might be In the critical industries where we have a huge range of product, we put together these big kits and you have to ship them complete. So you might have a kit with 1,000 items in it and you have to ship it complete, yet that business was up pretty well in the quarter. C and I was up nicely in the quarter and that led Critical Industries led the way. So I don't think I can put my finger on any of that.

Speaker 2

Of course, we had some of that, But we overcame it. Part of it is, like I said, agile marketing, allowing yourself, okay, I got something else to sell. So I think generally, it's not like we weren't without impact, but we kind of overcame it. It's sort of like You remember, you probably don't remember this Saturday Night Live, Roseanne, Roseanna, Dana. It's always something.

Speaker 2

And this is just the something of the day and it's our job as managers to get through it.

Speaker 4

It's Saturday Night Live School of Management. And so also just to Coleman, on the balance sheet, the stock is down 5% or 6% this morning. You've got SOT compounding nicely off of 16% prior year organic. Any kind of fresh thoughts on using the balance sheet to address Looks maybe like a little disconnect between performance and reaction?

Speaker 2

Well, I don't know. The electrodes that are implanted in my body giving me the stock price at every moment. I haven't looked at it yet. No, actually we didn't see that it was down necessarily. But look, I don't know, we take advantage of situations.

Speaker 2

I don't know. We say that we're trying to be agile in terms of share buyback. So I'll just leave it at that.

Operator

Thank you. We will now move to our next caller. Next, we have Scott Stember with CLT. Please go ahead.

Speaker 3

Good morning, guys, and thanks for taking my questions. Sure. Could you break out within the tools group, I don't know if you gave this before, hand tools versus some of the bigger ticket items, so How those performed versus last year?

Speaker 2

I'm trying to get off the quarter by quarter train of Look at that product lines, I don't know if they mean that much, but I will tell you that hand tools were down this quarter actually versus what were, I would say incandescent levels of Q3 and the bigger ticket items were up and as you hit double digits. So I think that kind of says it's sort of a reversal of what's been happening lately. And that I think that drag actually even though their margins 8%, 20.8%, that's kind of a drag on margins because the highest margin business is hand tools for us And the tools group, so that's kind of an interesting observation, I think, in that regard. But it seems like At least for our franchisees that tool storage and diagnostics were getting a little more prominent this time. Of course, Year over year versus the pre pandemic levels, they were all up nicely.

Speaker 2

It has to be to contribute to the 20.6%.

Speaker 3

Right. So, but at least on a year over year basis, we're talking like last year's hand tools were just through the roof.

Speaker 2

Yes, hand tools were down. But Okay. Like I said before, just in the way, it's always something. They go up and down like that. Can't read too much into a quarter, but that's what happened.

Speaker 2

But we kind of think that, It was encouraging to us to see tool storage come back double digits and diagnostics to be nice as well.

Speaker 3

All right. And the SFC, Anything that stood out? It sounds like everything was up year over year or even versus 2 years ago, more importantly. But is there any products or any one

Speaker 2

I don't know. No, I wouldn't say. I don't think so. It seems to all be good. I couldn't parse between all.

Speaker 2

Of course, there are variances in that. I think full storage is very popular at the SFC actually. But I want to point out, Scott, these are always their orders. And so you never know. The SFC a great SFC doesn't guarantee A great finish to the year or Q1 next year.

Speaker 2

A bad SFC doesn't doom you to a bad one because you A lot of other things that goes on between August and the end of the year in terms of selling and ordering and so on, but it's better than poking an eye with a sharp stick when everything, Everything is up double digits. And if you were there, you would have been impressed. I mean, the franchisees are pumped. I really mean it. They were I've never seen a more enthusiastic.

Speaker 2

That's why we get the idea of exhilaration. I think We're going beyond resilience when you're looking at the auto repair market in this situation.

Speaker 3

Got it. And then last question on the EV side. I know you guys I've worked with OEMs and have gained some, I guess, business related to toolkits that are specific and diagnostic to EVs. Is some of that embedded in some of the RS and I increases that you talked about for this quarter?

Speaker 2

Yes. It's actually yes, we have a couple of projects in this quarter. I think they're extending. We have one project that's extended for a couple of quarters, but it's added a couple I think another vehicle this quarter where we have from one big manufacturer. We don't like to name them, but They have 4 or 5 EV models that are coming out.

Speaker 2

We're providing a package to dealerships in metered out proportion across the country. So there's some of that there. And then of course you got dealer FX that is still coming to fruition, but was up nicely quarter over quarter, Still a little bit of a drag in terms of margin, but it's something year over year. So that was pretty nice. We're seeing ourselves Kind of get on that EV train, getting the early warnings.

Speaker 2

All these things are early warning. I mean, when you're with the when you're getting projects The OEM, that's an early warning on what the vehicle is going to need by the time they get into the business. And as Dealer FX grows, we have a Sort of like a neural network of early warning to see what's happened in the garage. So we're kind of positive about that. But it's early days.

Speaker 2

There aren't that many on the road yet.

Speaker 3

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

Speaker 2

Okay. Sure.

Operator

Next, we'll go to Luke Junk with Baird. Please go ahead.

Speaker 5

Nick Aldo, good morning.

Speaker 2

Good morning. Good morning.

Speaker 5

I got two questions this morning. First, Nick, you touched on the benefits of vertical integration in your comments To wrap up the prepared piece, certainly a lot of investor attention right now being paid to the supply chain issues and environment generally speaking. So I was hoping you could expand on any steps that you've taken going into the Q4 next year. Of course, we can see overall gross margin up 30 basis Points year on year this quarter, you mentioned RCI related benefits. I'm sure there's some other factors going into that.

Speaker 5

Would it be safe to say that you feel like you're on the front But in terms of addressing the current supply chain environment?

Speaker 2

Well, who knows? I mean, every day there's something new, but I think we're what I was trying to say was, Lucas, We do take steps and our model enables those steps to be particularly efficacious. The vertical integration means that we don't buy that much. Most of the stuff is in our house. If you think about a hand tool, raw steel comes in the back of the factory and basically we add very little when it comes out.

Speaker 2

So you're worried about steel. We buy the steel in the U. S. Sure. It's a supply chain.

Speaker 2

We buy some of our chips in the U. S. And closer places. So that's not bad. Circuit Board, those kinds of things.

Speaker 2

So we have those things as well as one of the advantages we have, Luke, and we do this, we're very aggressive in spot buying. So we go out and spot buy because we don't buy large quantities of any one thing. If you're an auto manufacturer, I used to be in Ford, you're buying something for the new Mustang or for the Ford Focus or whatever it is, you're buying a lot of stuff and it's Once that supply chain gets disrupted because the Shanghai port closes because of a couple of cases, You're kind of have trouble to move or get any alternative. Well, if you're only buying a little bit, you go out and find them. You find them in the And we have our guys actively doing that.

Speaker 2

That's why we're not seeing so much in terms of shortage. There may be still a little cost increase, but then We're agile pricing, so we don't have such a big problem in that regard. I'm not saying we're not actively working because boy, our people are Put a lot of energy into it, but if you look at the numbers, pretty well managed.

Speaker 5

Thank you for that. And then maybe this Might be a question for Aldo. Curious what insights you draw looking at your current credit metrics in terms of end mechanic customer health and borrowing capacity from here? I guess Specifically, I'm looking at the fact that the finance bad debt expense was down quite a bit for the last couple of quarters now. And while originations The Tools Group top line is certainly growing quite a bit faster than origination, especially if I look on, say, a 2 year stack basis.

Speaker 5

So So just any thoughts there as well as if there's any qualitative feedback from franchisees that would be interesting as well. Thanks.

Speaker 3

My view Luke would be that I think Technicians themselves are in a better financial position than where they were maybe a year or 2 years even back ago. I think that's a broad statement that applies to Many industries, I think you hear that out of the big banks. I mean customers are better servicing their debt than they were before. I think they have more discretionary Power spending and so far they've been applying it through their indebtedness. And I think we see the same trends.

Speaker 3

It's our job to capture that Incremental savings that they might be seeing if they're not borrowing as much as before and capturing business with tool sales. And I think you see that. So Snap on tool sales being up more than originations, I think is I applaud the Tools Group being able to entice customers to buy more stuff Because they have more money. From what you read from the Bureau of Labor Statistics, technician wages are doing pretty darn good. So they seem to be strong.

Speaker 3

They seem to have more flexibility in what they choose to buy and they seem to like to buy our products. So again, they're in a better I think than they were a year or so ago. Of course, every quarter brings potential new changes. But right now, it's been running very favorable. And as a result of that, Our going forward provision rates are lower than they might have been a year or 2 years ago.

Speaker 3

It's going back pre pandemic simply because of the debt servicing trends.

Speaker 5

Great. Thank you for that. I will go ahead and leave it there. Thank you.

Operator

Thank you. Next, we move to Gary Prestopino with Barrington Research. Please go ahead.

Speaker 2

Good morning, everyone. Good morning, Gary.

Speaker 6

Got a series of questions here. First of all, Nick, as you talk to your franchisees and you say they're like really pumped. I mean, what can you cite like 2 or three reasons why they are so optimistic about The repair industry for the next year or so, that's reflected in their order rates?

Speaker 2

Well, I think it's a couple of things. I think one is that they're seeing Their customers, the technicians in the garages, feeling the benefits of people sort of pivoting Back toward individual transportation, so people are driving more. You look at the miles driven, they're up. So you can See that and that makes them feel good. I think that this was something that you could logically figure out, but they're seeing the fruits of it now.

Speaker 2

You can see that, boy, the wages are rising. There's a lot of stories out around what they're at, but they're clearly rising. The BLS Data shows them rising both for year over year in the rolling 12 months and you can see it in the garages. And that's a reflection, yes, of a dearth Maybe, but there's always been a dearth of mechanics. It's a reflection, I think, of it's not so easy to get people in there because what they're doing now Is a particularly advanced skill and this is starting to dawn on us.

Speaker 2

I don't know, dawn on them is the wrong word, But starting to be reinforced in their mind about that. And then I think they're feeling what I would say is a general optimism that comes out of Having felt like they've engaged and managed the COVID, garages have been working for the whole time. So while The news, when you can see the news and everybody is appropriately worrying about Delta and all these things, people aren't It's not that they're not keeping themselves safe, but they're saying, hey, we can deal with this. We're not getting shocked again. Whatever happens, we're not going to be interrupted.

Speaker 2

We're going to keep going. Our upward In a crazy way, I suppose some of this is sort of you can see the sort of prosperity that came out of the in the 20s After the flu the last time, I can feel that in the garages. I feel it in a lot of different places, But you certainly feel an adraj and you feel what our franchisees and that's translating back to them. And then finally, I think our franchisees in particular Are recognizing that our products are more effective than ever. They have great faith in those products.

Speaker 2

And they're feeling I was with the National Franchisees, so the National NFAC, National Franchisees Advisory Council, Twelve guys from all over the country and they're feeling the things they're doing in terms of social media, in terms of RCI ing the van, in terms of the better training are giving them more selling time. So you'll get on a van like I was on a I was just on a van in California, Southern Cal and this guy says, yes, I now find out if I follow the program, I can reach more technicians. He's talking about reaching more technicians than he could before. Those are the things that are making a difference.

Speaker 6

Okay. That's very encouraging. And then in terms of your strong double digit growth in orders out of the Snap on franchisee conference, What was the growth in orders, well, the 2020 conference and even particularly in 2019 conference. Do you off the top of your head, do you remember how you came out of it?

Speaker 2

I don't know, but it wasn't double digits. You know what I mean? And it wasn't as you know. It was probably If I remember last year was kind of a little bit less across sort of across the board. 2019, it was probably different ups and downs.

Speaker 2

So some guys were up some products, and I'm talking about guys because I'm thinking of the product managers. Some areas were up double digits and others were down. This thing was across the board double digits. It was BOPO. This is a game lesson.

Speaker 2

Okay.

Speaker 6

Great. And then just lastly on the I want

Speaker 2

to Gary, before you go away from that, I want to emphasize, like I said before, this is orders, not sales. It's directionally indicative, not But better than a poke in an eye with a sharp stick, it tells you, you come away feeling good about this. We feel good about this better than we have of any SFC that have been around here.

Speaker 6

Okay. That's fine. And then just lastly on the diagnostic side, as older cars come into the park That have ADAS. Is that directly affecting your end demand for some of your diagnostic products?

Speaker 2

Yes. Well, it's actually broadly spoken. I think at first, it certainly is affecting the first, it's affecting the demand for Mitchell, Which is up nicely because Mitchell's got a very complete ADS suite in it that's industry leading. And it's also helping to drive the equipment business because the equipment, remember, I talking about the equipment business is holding up. This conference call is going to the dogs.

Speaker 2

And so the TruFit, ADAS System, which I talked about on the thing, is something that's helping drive that undercar equipment growth. And that's where you set up That helps that physically calibrates the system in the garage. And it's also driving some of the diagnostics, but the diagnostics with their intelligent features Are probably yet to feel the impetus from that. You'll see it coming in future quarters.

Speaker 6

Okay. Thank you. Sorry about the dog.

Speaker 2

That's okay. No problem.

Operator

Thank you. We will now move to Liz Suzuki with Bank of America. Please go ahead.

Speaker 1

Great. Thanks for Squeezing in

Speaker 7

my question. Could you talk about what you're seeing in cost inflation and how much of the organic growth in the Tools segment is impacted by price increases as you pass through those cost increases.

Speaker 2

We're not going to go into that necessarily. I would say, There's some price increase in there. I wouldn't say it's the major portion of the organic growth Because price rolls through the system, we're seeing some cost increases, but the Tools Group has been able to manage that somewhat. To the extent you do get pricing offsetting cost increases, it tends to depress you, it tends to knock down your margins because of course you get a dollar of sales And a dollar of cost that tends to do it, but it wasn't a major effect in this quarter.

Speaker 1

Got you. And then Nick and Aldo,

Speaker 7

I think you both touched on this A little bit in the prepared remarks and in the Q and A, just about supply chain disruptions. I mean, from a competitive standpoint, does this Create an opportunity for Snap on to meet the needs of your customers while some of your competitors that may do more importing may be more constrained on inventory?

Speaker 2

Sure. Well, I don't know. I can't speak for my competitors about being constrained. Actually, in reality, tell you the truth, Liz, Snap on is kind of interesting. It kind of works on itself.

Speaker 2

Our technicians either decide to buy Snap on Or they decide to buy another group of products. They hard to choose from another group of products. They hardly ever say, oh, I'm going to buy another product And I'd say, oh, I'll settle for the Snap on if the other one isn't available. So I'm not sure how much that helps. It certainly puts us in a better position to grow And probably capture new customers who might not be serviced by these people.

Speaker 2

There's some of that, I think. But I don't really like to talk about Competition because we really compete against ourselves pretty much. The better we get, the more franchisees capability we have, the more they're able to sell, the better our products is, The more it grows regardless of what the competition does.

Speaker 7

Great, understood. Thanks very much.

Speaker 3

Sure.

Operator

Thank you. Next, we go to David MacGregor with Longbow Research. Please go ahead.

Speaker 8

Yes. Good morning, everyone.

Speaker 2

Good morning.

Speaker 8

I wanted to just start off by building on the last question. And I guess, it would appear now so you're Offsetting a lot of the cost inflation with volume growth in RCI. And I'm just wondering what your expectations are for Pricing going forward and your ability to price some of that cost inflation going forward rather than relying on volume growth and RCI?

Speaker 2

Well, look, I think first of all, I think I tried to make the case and I think it's quite true that we have a lot of Insulation against that. We believe that we can price as we need to Because you have we have a direct model in a lot of cases where we're direct to the end customer versus some other people who are going And then secondly, the brand position allows us always to be the price leader. So We pretty much price relative to our prior products when we're doing normal pricing, David. When we're bringing out a new product, we look at where we Really where the competition is. So generally, I think to the extent we see costs arising, we can price against that.

Speaker 2

I don't have much to worry about that. It's probably not in every nook and cranny of our business, but I think It's true in most of our business, particularly given that given our brand position.

Speaker 8

Got it. Next question, really, is there a way to sort of help us understand just what sales growth was off the truck, what the sell through growth was in the quarter?

Speaker 2

I can tell you exactly. It was about the same as the sales growth to the truck. Okay. I can't give you much insight on what was sold off the truck so much with such precision, but it's Pretty much the

Speaker 8

same. It was pretty close. So how would you characterize truck level inventories right now, Nick? And maybe if there's any way of thinking hand tools versus bigger ticket items, that would be helpful.

Speaker 2

I would say everybody I talk to seems to be looking for tool storage. Now of course, that's a windshield survey. You're kind of familiar with those. But the thing is that you seem to see I think there's a need People want a little more tool storage. I think inventories, if anything, are probably down some versus historical levels.

Speaker 2

Because yes, this quarter we had equal, but in past quarters, sales off the truck kind of exceeded Our sales to the truck. So I think we've had, if you look back over the last 3, 4, 5 quarters, 6 quarters, you've seen that Sales of the truck exceeded. So I think inventories are kind of down. Now I don't know what that means. I'm not sure that there's going to be a restocking or not.

Speaker 2

I kind of get the feel that maybe they may restock some projects. Total storage was nice this quarter. I think off to the van. We had a nice, in fact big ticket was nice double digits this quarter. So it's kind of a little bit of a reversal of what's been happening previously.

Speaker 2

You haven't seen it yet fully in the originations, I guess. But look, I think there's a couple of things. I think one, it takes a while to work through that. And then secondly, I think people are kind of paid down their credit, so they've got their kind of in a situation where they're able to buy some

Speaker 8

I guess just to play out to pick up on your comment about credit, it seems like there And you've talked about this yourself. There's been more rotation towards revolving account credit as opposed to extended credit over the last year or so. And just thinking about how that's playing out now, your franchisees, obviously, they're a little more liquid, and so maybe in a better position to be able to provide that revolving Credit, I'm just wondering how what if you could update us in terms of what credit penetration rates look like for big ticket right now. Once upon a time, I think you told us big ticket was up, was about 90% credit and diagnostics was 50% to 60% credit. What would those credit penetrations look like in kind of this new world?

Speaker 2

I don't really have that number, but it's somewhat lower now. Part of it is because I think just what you say, customers are a little more frosh, the franchisees are a little more liquid. But also make no mistake about this optimism flows in this. I mean the franchisees get a little bit more And they say, hey, if I can put a dollar in RA, I'm going to get it back. It's a great investment for me.

Speaker 2

Why would I put in the bank or something like So there's some of that flow through the franchise system. What we view is, I think for sure is that The customers themselves have unused credit or untapped credit capacity. So that will come up. We haven't really seen There was a rotation at the beginning of the virus period toward RA, but this quarter I'd say it's kind of stayed solid. RA And EC have been same as last quarter and maybe the quarter before that was the same way.

Speaker 2

So it's kind of found that equilibrium right now. We'll see how it plays out going forward. And then the contract Whatever it is that has, it didn't impact our big ticket sales this time.

Speaker 8

Yes. Congratulations there. And on the contract, 9 5 versus the finance receivables, 5.7 in terms of originations growth. Contracts been out in front of finance receivables for a while now. Do you expect that Continue or do you see that at some point you're nearby kind of getting back to a more equal level or maybe finance receivables getting to a faster level of growth at contract?

Speaker 3

Contract receivables tend to run up a little bit with the Snap on franchisee conference because you get some short term loan Financing arrangements there, but no, there's nothing structurally there that would say that the EC will not get back to higher levels. And actually EC was pretty decent and The U. S. Was above the average in this case. So they had strong performance and it was nice originations David in both tool storage and diagnostics in the quarter.

Speaker 8

Yes. Last question for me is just social media sales. And I guess you've kind of alluded to this in your comments, Nick, about online sales, but You don't have to look very far online to see franchisees selling tools through Facebook and other platforms. Can you just talk about how you foresee that growing and does that accelerate and does that help you in terms of your

Speaker 2

margin going forward? David, I wasn't in my comments, I wasn't talking about selling. I was talking about using social media To inform customers about product and promotions and other things, Which speeds up face to face time for actual selling. I don't really see social media sales as growing that much. I mean, It's not much of a factor right now.

Speaker 2

Now it might, but I think generally by and large, the overwhelming Use of electronic media via the franchisees are just that to try to orchestrate. Okay. I want you to know about this. So when I come in, I'm going to tell you why you need it, that kind of thing.

Speaker 8

Productivity builder.

Speaker 2

Yes. Sure.

Speaker 8

Thanks very much, gentlemen.

Speaker 2

Okay.

Operator

Thank you. We have time for one additional question. Our final question comes from Bret Jordan with Jefferies. Please go ahead.

Speaker 2

Bret Jordan.

Speaker 9

Hi, good morning. This is actually Ethan Henley on for Bret. Okay. Yes. Could you just provide any color on the sales cadence throughout the quarter?

Speaker 2

Say that again. I didn't quite hear it. Could you say it again, please? Sales cadence?

Speaker 9

Yes. Yes, correct. Yes, just the sales cadence.

Speaker 2

Yes. Look, it was Pretty much the same as past quarters. I think generally A little bit interrupted. If you want to go back to I'll give you this. If you go back 2 years beyond the COVID era, the Q3 was particularly aberrated by the franchisee conference.

Speaker 2

So you get kind of a week early couple of months, certainly early 1 month in the quarter. July was like a wasteland. And so then things will come roaring back when you got the SFC. People would be keeping their powder dry pretty much. The last 2 years, We've been able to get out of that by a number of artifices.

Speaker 2

And so it's a much more standard where You have of course, the quarter is 445 and so you get kind of that kind of distribution maybe with A little higher number in the last quarter, but it's nothing particularly special, I think. This quarter, of course, Is above, so each quarter, it's kind of going upwards versus its prior numbers. And so you feel like The upward trajectory, you can see it if you look very, very closely at the month to month numbers in a quarter as you're going to as we're going Through the months and the quarters and the years upwards, but not much difference in distribution, except for that sort of general monotonic trend.

Speaker 9

Understood. That's helpful. Thank you. And then, another one here on the corporate expense. It was Pretty high $34,000,000 up about $10,000,000 year over year and $5,000,000 sequentially.

Speaker 9

I know you mentioned sort of performance based And some brand building costs, but anything outside of those 2 buckets?

Speaker 2

Yes. Well, the SFC was live this year. So you think, like think of it this way, okay, we had brand building, we had stock based, we had comp, expense based comp, And this was our celebration of our 100th anniversary. So the SFC and These celebrations we had there were bigger and better than any prior year. So you have some of that into your situation because the franchisees Our investment in the company, I think I said they're positive about the days decades ahead with Snap on.

Speaker 2

And so That merits a little bit of celebration when you reach a centennial milestone. So there's some of that in there.

Speaker 9

Sure. Thank you. And then just one last one, if you don't mind. Given the Strong business performance and cash flow. And I know you sort of mentioned opportunistically repurchasing shares, but where do share repurchases stand in terms of Capital allocation given where the stock is trading.

Speaker 2

We have a 4 piece capital allocation. We tend to be working capital investors. You know what I mean? In other words, this is a working capital intense So when we grow, we tend to the COVID has kind of changed, not changed, but obscured that dynamic somewhat. But generally, as you grow, you have working capital.

Speaker 2

Then we look at acquisitions. We believe we have runways for growth, particularly in repair shop owners and managers in the garages or in Maybe in C and I in some places, and we've done some of that at Dealer FX as an example. We have a dividend that we've paid a dividend every quarter since Whether we should increase it or not, we look at that carefully. And then we are agile about share purchases. So you have kind of a four way look at that and They're all a draw on what we might do with cash depending on the situation.

Speaker 9

Great. Thank you very much.

Speaker 3

Sure.

Operator

That concludes today's question and answer session. Ms. Burbski, at this time, I will turn the conference back to you for any closing remarks.

Speaker 1

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

Thank you all for your attention. This concludes today's conference call. All participants may now disconnect.

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