Okay. Thank you, David, welcome to our Snap-on fireside discussion here, for those listening in. Nick, thanks for joining our conference. Sure. Great to see you, hope the one-on-ones and small groups are going well. You know, this is, you know, made for people newer to the stock or just looking to listen in a bit. I always appreciate the opportunity to pick and choose the questions. Just to start off, in case there's some newer people on the line, just curious if you could lay out the kind of broad strokes of Snap-on's business model, the market positions, and the competitive distinctions and challenges. I think people understand the vans franchise. We've seen them our whole lives, but that's just one aspect. Look, I think you said it well there, Chris, is that you know us very well, of course. Look, I think Snap-on started out in a kind of van business, and it developed the art of calling on technicians, the guys who actually twirl the wrenches, to the point and selling them wrenches through these vans directly. Today, we have 3,400 vans, and we sell directly to those. We call on about 1 million technicians. That was a narrow description of what Snap-on actually does. Actually, Snap-on operates effectively in the critical, its principal value creating mechanism. What we do everywhere is we try to be in the workplaces, observing the work, figuring out where the particularly sticky tasks are, and designing and taking those insights to design an implement, either a wrench or a piece of software that will make that task easier. That rides above almost any industry, really. It does require that kind of thing requires that the industry and the job is critical. That is the need for the penalty for failure is high in places like vehicle repair or mining, or oil and gas, or aviation or the military. The need for repeatability and reliability justifies a Snap-on level product. From that comes our business of today. We still have the van model. Like you said, when everybody thinks about Snap-on, they think of us in a van, and it's 300 and 400 people calling on the end users. We're very vertically integrated, calling on 1 million technicians. That business we call a Tools Group. The quarter they were up 5% as reported, 3.4% organically, their profitability was 21.6% up, 160 basis points. That's about 40% of our business. We're organized by customer. You have a customer base that stands right next to them. It's the repair shop owners and managers, not the guys who twirl the wrenches, the guys who run the shop. They appreciate Snap-on too, 'cause vehicle repairs is our history, and we understand it very well. We sell them what I would call semi-capital projects, capital things like, you know, software to run the shop or software to identify problems and solve the diagnostics problem in a car or undercar equipment like aligners or tool, tire changers or tire balancers. Those that business is, you know, we kind of came to it lately, but it's about 28% of our business. By the way, we don't sell through the vans. We sell direct or through distributors to that different customer base. That was about flat in a quarter, but it was up a little bit, and it got enough to be the highest ever quarter for that group. Its profitability was 24.6% down, 60 basis points, but its gross margins were up 30 basis points. That difference was really pretty much due to two things. I mean the lower profitability was due to two things: one, currency, and two, spending on things like better software systems, software development, and brand building. You have that business. Finally, about another 28% of our business, you have the Commercial and Industrial business. We say it's when we roll the Snap-on brand out of the garage, but still the critical things where the penalty for failure is high. You go out there, it's industries like the military, oil and gas, mining, general industry, heavy duty, education, natural resources. About 45% of that business, or 40% of the business is through direct sales that go out there and deal directly with the customer. We sell customized tools that will solve the problems. For example, we sell a special customized kit, well, which will deal with the particular idiosyncrasies of repairing an F-35 fighter. We will provide a tool set that will help some of the heavy duty equipment. That business has been growing pretty well. That's been a decent business, and it's part of our Commercial & Industrial Group, which also has in it what we do in emerging markets and has in it a European hand tool business which sells through distributors to the trades and to auto repair and another number of other items and other areas in Europe. When you roll those businesses together, that grew at 10.8% a quarter, as reported, 7.1% organically. Its profitability wasn't as strong as we'd like to see it, 14.4% down, 110 basis points. The 110 basis points reflected about 50 basis points of currency. Currency was not our friend this quarter. The other piece of it is, this is the place, because it's the most international of our businesses, was most affected by material costs and tariffs. Then you roll back from that. One of the things, if you wanna know all about Snap-on and our business model, you can't talk about it unless you hear about the brand, and the brand is the outward sign of pride and dignity that working men and women take in their profession. We literally have people buy our jackets, put our wrenches in the hands of their newborns, or ask us for small toolboxes to bury their loved ones in it, and I'm not kidding. Yeah, those toolboxes are kind of interesting. You kind of tailor them to a lot of different things, and it's a really interesting marketing model with the storage space there. You know, going into that, does it feel like storage has turned a corner and, you know, now? I think it had, I guess it takes a little background. We think we see positive signs about tool storage, which is a product which is sold through the van channel, the franchise van channel. Remember, we, as what I just told you, is we're organized by customer. The van channel sells to the technicians, RS&I sells to the owners and managers at a shop. C&I sells to other industries, not automotive repair, but that are still critical, and sells to, not to the users, but to the owners of those, the people in charge of those various facilities. If you come back to tool storage, it was positive in the quarter, and it's the first time in a while it's been positive year-over-year. The reason why this is significant, starting in the fourth quarter of 2023, we identified that uncertainty started to separate the grassroots economy from the financial economy, and it particularly affected the mechanics. Vehicle repair is one of those great resilient markets. There are a lot of secular drivers behind it. The number of cars are getting bigger every year. Number of cars on the road are getting bigger. The cars are getting older. Now they're 12.8%. They're now 12.8 years old, and they've gotten older every year since 1980. It's arithmetic. Then on top of it, there is a growing complexity of cars on the road that requires more tools and more information to actually repair them efficaciously. They, those things are rooted in things like different powertrains, electric vehicles, you know, plug-in hybrids and super hybrids, as well as advancements in internal combustion engines that create a little challenge. There's the growing desire for autonomy. Not just autonomy. Autonomous cars, of course, are the end, but every car these days is starting to take on automated driver assist systems, and this creates a greater need for things like, you know, ability to decode, to decode those systems to make sure they're always in sync, to recalibrate those systems. Those things drive that business. Vehicle repair is 1 of the great businesses. Technicians are cash-rich, and you can see it in the Bureau of Labor data. Hours up, technicians up, wages up, household investment and vehicle repair up year-over-year, high single digits. Our technicians that we call on are cash-rich. Starting back in, you know, the fourth quarter of 2023, they started to get confidence poor. They were looking at things like the border, the Ukraine war, and inflation bearing down on them. Since then, you know, you've had a number of different instances of rising problems, the Middle East war that was finally settled. You know, now you have the Iran war. You have conflicts with Iran. You had conflicts with China that has been ongoing. This weighs on the psyche of our customers. What we found is, with this change, with this feeling about uncertainty, they withdrew from Let's say not withdrew, but had less preference for buying big-ticket items. The reason is this. They could see, particularly with this administration, with the daily items that are coming out of Washington, they feel like they're on Space Mountain. You know, you're going back and forth. You believe you know, you believe in where you're going, but you're worried you're gonna tilt off the rails, and they worry about that, and they figure a tilt off would create a problem for them because they don't have the cushion that other people do, even though they're cash-rich now. So they say, "Well, we don't wanna tie ourselves to long cash flows that we're required to pay." Less people wanna do that. In Snap-on business, we have two types of sales. One, the big-ticket items like here, like this tool storage box behind me, that's, you know, we sell that with the credit company finance note for three, four, five years terms. They have pulled back from that over time. In the first quarter, we started to see for the first time that they seem to be coming back in terms of our sales. One quarter does not a trend make, it does not confirm that uncertainty is abating, it's better than a poke in the eye with sharp stick. I think it's positive for us in that regard. Right. I mean the comps have generally been easy, so it wasn't just a peculiar comp issue in the first quarter, just it fundamentally felt like a better quarter for tool- Yeah, I would've said, Chris, the comps have been well, you say the comp was easy, not so much when you look particularly at tool storage, you know. I think we thought that was a positive. Yeah. Okay, great. You know, while storage has had its sort of own cycle and it's been kind of a similar cycle for SOT in general with the pullback, but you have had some successes with assortment along the way to quicker payback items, and some of that strategy involved adapting manufacturing capacity. Where are you with capacity alignment now for SOT? We called it the pivot. The Tools Group pivots to shorter payback items. I said we had tool storage boxes, which are financed over three, four, five years. The other two-thirds of the business are things like power tools and hand tools and other smaller items, and they're financed only like 12 - 15 weeks, and customers are more comfortable signing up for that kind of commitment. We took the Tools Group and tried to pivot to provide a richer mix of products in those areas. What you gotta do is you gotta get designs going to focus more. You gotta take resources and focus more on those smaller payback items. You've gotta take the manufacturing and tilt it toward that. Then you have to take the marketing, which is the easiest stuff, I guess, and you, and you arrange your promotions to be more effective in that. As the quarters have gone by, we've gotten better and better at that, and that's some of what you're seeing in the first quarter. Okay. Yeah. Is there a lot more capacity tweaking always underway there, or have you gotten through kind of the most? We got through most of it. I think, look, there's always something you can do in that regard. I mean, it's a matter of balance. I mean, let's say, for example, if Chris, if the uncertainty continues, we keep tilting away from big-ticket items. Right now, we're at a certain point we could make it more small-ticket items. Remember that when I say that people had a higher preference for shorter payback items, it isn't like no one took tool storage units. I mean, tool storage was still- Right. Selling. It just was down. Yep. I think maybe to wrap up on SOT, then we'll move along. I think you had a favorable sell-through versus sell-in in the last couple of quarters, you know, that might suggest some increasing liquidity for your franchisees and put them in a good position. Sure. You're exactly right. You know very well. We had. What Chris is referring to is that when we talk about our sales, they are sales to the franchisee. We also monitor the sales from the franchisee to the actual technician customers. They were positive. That was a positive number for a couple of quarters. If you look at the last half we've gone through, that number selling off is a little bigger than selling to, you know, or selling to. As, as you say, the, like the franchisees, the vans themselves should be in a little bit better position at this situation. You always like to see that. Generally, though, Chris, you know, it generally, I think it evens out over years. You know, if you look at a year, it's usually pretty close. Oh, sure. Yeah. Right. It's just kind of interesting. Do you think, I mean, you know, there's a lot of foresight in your experienced franchisee network of, you know, what might be coming down the pike or certain demand streams. Do you think they're kind of doing a little inventory cleansing, a little hygiene? Are there certain programs that you think they're preparing for? That can be. It can be. Look, I think certainly it's an unmitigated positive that you have a positive sell off the van, and it's better than sell to the van. That's a positive. I was talking to a bunch of franchisees over the weekend because we had our national, the Franchisee Advisory Council for both Canada and United States. It had about 25 franchisees here. I have to tell you, they all by and large, they seem pretty optimistic, pretty positive. I take that to be a good dipstick, you know, a depth charge in terms of where things are. I don't think anybody knows how this Iran war is gonna affect things. Despite that, they seemed pretty good. I came away from that in a very positive frame of mind. Yeah, I think people are kind of used to stuff happening now and people just getting back to business. Saw that with a lot of, like, process industry, project orders with some that were gated- Sure. Other companies. For C&I, you know, it seems to be generating some incremental strategic momentum. You mentioned expanding field reps, stronger performance in kitting solutions. Yeah. Alignment of production capacity with the front-end structures of C&I. Just wondering if you could discuss those factors and, you know, what's seeming to suggest internal momentum building as opposed to maybe just a better economic backdrop. Yeah, I don't think it was a better economic background. I mean, Look, I think part of it is, you know, if you step back for a minute and you allow me a moment, the principal pacing element of C&I is for us to get more understanding of the needs of critical industry customers. That is customers in aviation, oil and gas, in the military, and so on. Remember, I started out the whole thing by saying our principal value-creating mechanism is to go into where the work's being done, understand it, and figure out how we can make those particular jobs easier. That's our art. We're really good at it in vehicle repair because we've been doing it for 106 years, 105+, more than 105 years. In fact, in this building, there are 600 people, and 300 think they're car mechanics. They can really interpret. If you're talking about aviation, well, we're building. What you're seeing there is we're building an understanding and feeding those insights back to create a richer and richer product line that's customized to particular jobs, and that's what we're seeing in the principal component. C&I has a lot of components, but the principal component, which we call the Direct Critical Industries business, we saw some nice gains there. Part of it is, one, we're building a product line. Two, we recently added. Well, recently, two years ago, we added more capacity. When you add capacity, Chris, you know, you start out and it really helps you. As time goes on for some period of time, you understand how to wield that capacity more and more effectively, and that's what we're seeing in the Critical Industries. Critical Industry was up its highest in almost two years. Year- over- year, it was up high single digits, and its profitability is strong. I mean, every bit as strong as the Tools Group. That business, I think led the way in C&I. I'm very optimistic about it. You have other pieces in C&I. You've got the European hand tool business, which is more tepid in its profitability. It was up some, but Europe still has a bunch of pain, you know. That business is okay. You have power tools and the power tools business, which makes the power tools for us, and the torque business. Those are the businesses most affected by material cost increases and tariffs. That's where they took a lot of hits in that situation and in that area. That's where we took a lot of the, I guess, increases or negative impacts of the material costs. Then you have Asia-Pacific, who is kind of gaining momentum. One of the things I'm positive about in the Asia region is that we always thought this would happen. We invest out there. We build factories. We develop distribution. We build a product line, and then usually start out trying to penetrate and create a position in the market in the middle. Unlike most Snap-on, you try to build it in the middle because they're in a place. In an emerging market, there isn't that appreciation for the best product. Now what you're starting to see is a more higher quality tools that would be under the Snap-on brand and even a stronger appreciation for some of our most sophisticated products like the automated tool control boxes, which keep track of tools to make sure they don't get left on site, let's say, in an engine, in a jet engine, after they close up in the cell. That's become more popular. I'm kind of positive about that. You see that business. If you step back, I don't think one of the things I mentioned is, I did talk about, you know, I know one of the questions that everybody will have these days is, how's material cost increase and tariffs hitting you? It does hit us some. We're certainly not immune to tariffs, but we're resistant. Even if you make in the United States, the material costs have drifted up. If you look at our numbers, and this is the gross margins, the gross margin for the corporation, I think, was 50.4%, down 30 basis points. It took a 40 basis point hit from unfavorable currency. Basically, we're holding flat gross margins in a time in which the cost of goods sold is, you know, probably the most turbulent that I've seen in a while. That's a credit to our, what we call Snap-on Value Creation Processes, you know, which we say is safety, quality. We keep the quality up. Customer connection and innovation, where you're in the shop, and you turn those insights into an innovation. Also Rapid Continuous Improvement. People are at every site. We have special teams with Japanese consultants that fix particular problems and then irrigate the rest of the corporation in the techniques learned. We all go to a site once a year to work on this, and we honor the best teams with a traveling trophy and prizes to have parties. That business, that's what fuels our business in terms of improvement, and you can see it in the gross margins in this period. Okay. yeah, for the particular area of, what the, power tools and the specialty torque that you mentioned. Yeah. Is that a place where you can catch up on price with the lag, or is that just it's gonna be a negative equation when there's inflation? Well, I think they get better and better at it 'cause part of this is swapping out components that are eating t-- that they're getting hit with t--. Well, who knows what the tariffs are gonna be? You know, the tariffs in China went 150%, and then it was 55%, then it was 45%. I don't know. One thing I do know, though, the tariffs are starting to lap tariffs. The second quarter and third quarter and fourth quarter next year are lapping tariffs. First quarter had an unfavorable comparison to any kind of tariffs you had. You felt like the princess and the pea. You know, you could feel any of those things on a year-over-year basis. I do think they'll get better. Part of the reason they're maybe not as helpful to C&I as they otherwise could be is they share the margin with the Tools Group. A lot of their stuff goes through the Tools Group. Yeah, they bear some of those increasing costs, and it goes through the Tools Group, and we can price for it there. Oh, yep. It dilutes versus say, the critical industries business, which is about 45% of it, where we make it in C&I, and we sell it directly. Gotcha. Okay, wanted to talk about the software business. Yeah. You mentioned it's up to about a third of RS&I now. Just wanna hear you kind of mark-to-market what the composition of different pieces of that, how you define software sales, you know? Yeah. Pure versus embedded. I'm sure there's a mix of that in there. You know, what you're seeing on penetration rates for the subscription models. Actually, we don't have too much embedded in that number. That's pretty much more pure. We do have a lot of embedded software in things like aligners or tire balancers or other things, you know. It is, I guess you could say it includes two pieces, two big pieces. I think diagnostics and information systems sold to independent repair shops. That was up in the quarter, that can range from the handheld diagnostic units, which hold a lot of software, including wielding our proprietary databases, which are gonna be enhanced by the use of AI through those things. We have been working AI to actually develop those databases. As the systems improve, we'll be able to wield them even more efficaciously. You see, we see AI as allowing us to bring out superior product, not just creating efficiencies. You've got subscription-based services, you know, like for, let's say, Shop Management or repair information or Electronic Parts Catalogs and so on. Those are kind of fix the difference between those. You have some things that are associated with a particular product that we sell them by the drink, and that would be diagnostics. We have a bunch of other businesses that are rooted in subscription. That's what makes up software for us. Okay. I should add, the subscriptions are a growing amount of that. Growing piece of the pie. Yeah. Yeah, you know, you break out certain categories of growth in RS&I, tends not to be software as a standard disclosure like you do have for undercar and Electronic Parts Catalogs, because I think the diagnostics part includes hardware too. Just curious why the software piece isn't broken out a little more? 'Cause I don't like breaking it out 'cause it's in a bunch of different businesses. That's why. Okay. It kind of confuses the issue. I will say software, we're very positive about its growth trajectory. That's what I'd say. You know what influences some things like this? For example, in this quarter for RS&I, or in the past quarter, you have the question of diagnostics, which was one of the categories that was down in the Tools Group despite the overall increase. What drives that, Chris, is diagnostics, I think, has maybe six different product offerings. It's a very model-based quarters. If you introduce a new product, boy, if it hits, if it's the right product, it tends to drive things up in a quarter, and that tends to go out for a couple quarters. After that, the penetration, the exceptional penetration tends to stop, and it tends to, you know, kind of, adopt a more standard sales pattern. If you're comparing year-over-year without a new product, you can see some weaker comparisons. We just, in the second quarter last year, we launched a, toward the end of the first quarter, we launched a new diagnostics unit, it was a little tougher comparisons. We've just launched, I think it was Thursday, a new product. Last year, we launched the TRITON, which is our number two. We have these striped by highest, you know, most challenged technician, that's the top of the line. Next works on a bunch of different things like calibration systems and so on. You keep going down until you got entry-level. Last year, we launched the number two. This year, we launched the number three, which is the APOLLO. It just launched last Thursday, and it's aimed at the middle. We'll have to see how that plays out, but we're optimistic. I think we're pretty positive. The launch seems to have gone pretty well. Okay. Sounds good. You know, I think a big part of what you guys do is to develop key initiatives to help franchisee productivity. I know coming out of the pandemic shutdown part of it, phase of it, adoption of a lot of social media tools and electronic selling aids was a big part of what really opened up the valves and the capacity there. Just curious right now. I know there's always a lot of blocking and tackling. Not every environment is like, "Hey, we got this, you know, particular initiative here." Just wondering what you're focused on advancing with the franchisees in terms of professional development these days. The big thing is, everything about the franchisee, Chris, is how much time can we save them so they can spend more selling time? See, because they're calling on 1 million technicians, so they need selling time. It's one of the things. It tends to be one of the pacing elements. Every once in a while, we'll run up against a ceiling that they don't have any more selling time, and we can't follow the market. One of the elements here is, as our products have become more sophisticated, specifically around the diagnostics product line, but also some of the power options in our tool storage and some of the other torque business, we need to give them more training so they can more compactly explain the great advantages of these, of these sophisticated tools to the customer and how they can wield them. That's sort of part of our part of our activity 'cause they can go in. What'll happen is they're supposed to take seven minutes per technician. They can roll into a garage with, say, like, a TRITON or the new APOLLO and take 20 minutes trying to explain it. We're trying to make sure they can explain it in seven. All right. You know, at RS&I, the OEM business looks probably levels off after a couple years of really exceptional double-digit growth. I'm curious how you're thinking about the growth prospects for that segment in the near, medium term. Seems like C&I and SOT trends are a little more clear. Yeah. Look, I think this. I think first, I have to give a commercial for RS&I because I think I said this, although when you're in these events each day, you're not sure what you said during this meeting versus the other ones. Look, I wanna emphasize that, yeah, RS&I was kind of flat, but it was still the biggest quarter we ever had in terms of sales, so it wasn't chopped liver. One of the headwinds between that is, as you say, we have that business. We call it the EQS business. It's a lumpy business. I was at, I used to work at the auto companies as an engineer, and what happens is when you design a car, you pay attention to all kinds of things like cost and performance and emissions and safety and all that stuff, but you don't pay attention to repairability. When a car comes out, they look at the car and say, "Wait a minute." There are certain idiosyncrasies to this car design that makes it harder to repair, so we need to aid the dealer technicians. They commission Snap-on, and I think we're the leader in this field now, to provide a set of tools or software that each of the dealerships need. We've been doing pretty well in that. One is because there have been a bunch of programs, two, we've gotten better and better, and we've gained share. In this quarter, it was a flat quarter for that business, that is part of the headwind on the sales in both the OEM area and in RS&I in general. It's hard to predict in the next quarter 'cause lots of times, you know, Chris, the launch dates of these programs, even though we see a nice, I guess, landscape of programs coming up, the launch dates tend to be quite fluid, we're not sure when they'll come in. I feel pretty positive about the business going forward, particularly 'cause we are now the go-to business to for OEMs to try to help them in this area. Yeah, it sounds like you really kind of took a step up, asserted your preeminence in that space over the past couple years. I haven't heard you talk about it in those terms prior to that, so point noted there. Yeah. Yeah. Okay, I think that's a positive note to end on here as we're at time. Always great speaking with you, Nick. Good to see you, Chris. Catch you later. You know a lot about our company. It's always a pleasure to talk to you. Indeed. Likewise. Bye.