Snap-on (SNA) Q2 2025 Earnings Call Transcript
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What's fascinating about this is Image source: The Motley Fool. DATEThursday, July 17, 2025 at 10 a. ETCALL PARTICIPANTSChairman & Chief Executive Officer — Nick PinchukSenior Vice President & Chief...
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14 min read
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investment
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July 17, 2025
11:35 AM
The Motley Fool
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What's fascinating this is Image source: The Motley Fool
DATEThursday, July 17, 2025 at 10 a
ETCALL PARTICIPANTSChairman & Chief Executive Officer — Nick PinchukSenior Vice President & Chief Financial Officer — Aldo J
In contrast, PagliariVice President, Investor Relations — Sara VerbskyNeed a quote from one of our analysts
In contrast, [ tected] RISKSCommercial & Industrial Group Weakness: Segment sales fell 7
Furthermore, 6% organically in Q2 FY2025 and operating margin contracted 320 basis points to 13
Moreover, 5% in the quarter, primarily due to ject delays and international market disruptions, particularly in Asia Pacific and Europe
Nevertheless, Decreased Tool Storage and Loan Originations: Originations in Financial Services declined 4 (noteworthy indeed), in this volatile climate. 9% in Q2 FY2025, largely from reduced demand for discretionary big-ticket items, such as tool storage
Increased Operating Expenses: Operating expenses as a percentage of net sales rose 170 basis points to 28 (something worth watching). 5% from prior-year levels for the second quarter, driven by higher personnel costs and the absence of a prior-year legal settlement benefit
Negative Foreign Currency Impact: Unfavorable foreign currency exchange contributed 50 basis points of headwind to the gross margin in Q2 FY2025
However, TAKEAWAYSConsolidated Sales: $1,179 (which is quite significant). 4 million (GAAP, Q2 FY2025), flat, with organic sales down 0. 7% in Q2 FY2025 after $8. 6 million of favorable currency translation in Q2 FY2025
At the same time, 5% gross margin for the second quarter, down 10 basis points from last year, with 50 basis points of foreign currency pressure offset by savings from rapid continuous imvement (RCI) initiatives
Operating Income: Opco operating income was $259. 1 million for Q2 FY2025, down 7 (this bears monitoring) (this bears monitoring). 6% in the quarter, excluding a prior-year gain of $11. 2 million from a nonrecurring legal win in Q2 FY2024
Operating Margin: Consolidated operating margin before financial services was 22% for Q2 FY2025, 180 basis points below last year, mostly due to increased investment and removal of the legal payment benefit, in light of current trends
Earnings per : $4 (this bears monitoring). 72 GAAP diluted EPS for Q2 FY2025, a decrease of $0
Nevertheless, 35 from the second quarter of the prior year, including a $0. 16 per prior-year legal payment benefit in Q2 FY2024 and a $0. 09 pension amortization headwind in the quarter, plus a $0, in today's financial world
Additionally, 06 negative EPS impact from foreign exchange (fascinating analysis), given the current landscape
Meanwhile, Snap-on Tools Group Sales: $491 million in sales for the Snap-on Tools Group for Q2 FY2025, reflecting a 1. 6% organic gain, with US up low single digits and international sales were flat; operating margin remained at 23, in today's financial world
In contrast, 8% for the quarter (this bears monitoring)
Repair Systems & Information Group (RS&I) Sales: $468, in today's market environment
Moreover, 6 million for Q2 FY2025, with a 2 (an important development), considering recent developments
On the other hand, Furthermore, 3% organic gain and 60 basis-point margin imvement to 25. 6% from 25% reported in 2024; OEM dealership up double digits
Financial Services Performance: Revenue was $101. 7 million in the second quarter, up $1. 2 million from the second quarter of the prior year; Operating earnings for financial services declined to $68, in this volatile climate
Furthermore, 2 million from $70. 2 million in 2024; loan originations declined 4. 9% to $293 million
However, Commercial & Industrial (C&I) Group Sales: $347
Conversely, 8 million for Q2 FY2025, with a 7. 6% organic sales drop, mainly driven by double-digit declines in Asia Pacific and Europe, as well as ject delays in US aviation and the military
Cash Flow from Operations: Cash vided by operating activities was $237. 2 million for Q2 FY2025, a decline from $301, in this volatile climate. 1 million in the prior year period, primarily due to higher working capital requirements and lower net earnings
However, At the same time, Balance Sheet & Capital Actions: Quarter-end cash of $1 (which is quite significant)
Meanwhile, 46 billion for Q2 FY2025, with $111
At the same time, 8 million in dividends paid and $79 million in repurchases; $357. 9 million of repurchase authorization remains as of quarter end, in today's financial world
Inventory & Receivables: Inventories increased by $54, in today's financial world
However, 3 million since year-end 2024, with inventory turns of 2. 4 on a trailing twelve month basis and day sales outstanding was 65 days, down one day sequentially, amid market uncertainty
Management Capital Guidance: Expected corporate expenses of $27 million per quarter for the remainder of FY2025
Duct Innovation: New ducts across segments—including next-generation cordless ratchets, the CTM 550 cordless torque multiplier, and a redesigned Triton diagnostic unit priced at $4,500–$5,000—met nician demand for quicker payback tools
Segment Margin Performance: RS&I achieved its twelfth operating income margin expansion in 13 quarters, while Snap-on Tools reported one of its top margin levels ever despite uncertainty, with an operating margin of 23, given current economic conditions
However, SUMMARYSnap-on Incorporated (SNA 7. 37%) reported flat consolidated sales (GAAP) for Q2 FY2025 and a 0, given current economic conditions. 7% organic sales decline, with performance pressured by reduced volumes and unfavorable foreign exchange in Commercial & Industrial (C&I), but offset by organic gains in Snap-on Tools and RS&I, in today's financial world
The gross margin (GAAP) of 50. 5% reflected operational resiliency, successfully countering currency and tariff headwinds through rapid continuous imvement (something worth watching)
Conversely, Management emphasized investment in duct innovation, notably expanding diagnostic offerings and advancing faster payback tools to capture shifting nician preferences (this bears monitoring)
Financial Services originations declined 4. 9% and tool storage sales came under pressure amid customer hesitation around high-ticket items, which management attributed to turbulence from macroeconomic and trade policy shocks (which is quite significant)
Snap-on closed Q2 FY2025 with lower net income (GAAP), reduced quarterly operating cash generation, and a stable balance sheet supporting continued dividend payments, repurchases, and a cautious apach to capital allocation, in light of current trends
Looking forward, management reaffirmed guidance on expense structure and anticipated pension costs, while remaining vigilant on further trade developments, supply chain risk, and potential acquisition opportunities
Chairman Pinchuk said, "we navigated the roller coaster and exited the quarter stronger than when we entered. " highlighting confidence in core franchise performance and strategic execution, in today's market environment
CFO Pagliari stated that Unfavorable currency translation—chiefly the Swedish krona versus the euro and US dollar—was the primary cause of a 50-basis-point decline in gross margin (something worth watching)
Inventory investment and ext supply chain lead times resulted in higher working capital, which, along with lower net earnings, reduced operating cash flow by $63. 9 million in the second quarter compared to the prior year, in light of current trends
While management observed ject delays in C&I and pockets of hesitation among independent shop customers, order books strengthened as the quarter gressed, suggesting partial accommodation to macro shocks
Rising personnel and brand investment costs, combined with the absence of a prior-year $11
In contrast, 2 million legal recovery, were the main drivers of increased operating expense ratios
However, No speculative M&A pipeline specifics were given, though management ed that we have a pretty large landscape of small to mid-size targets focused on repair shops and critical industries
INDUSTRY GLOSSARYRCI (Rapid Continuous Imvement): Snap-on's internal lean manufacturing and operational efficiency initiative, designed to drive cost savings and offset external pressures
Additionally, At the same time, RS&I (Repair Systems & Information Group): Segment focusing on diagnostic equipment, shop management software, and services for fessional repair shops and OEM dealerships
Snap-on Franchisee Conference (SFC): Annual event for Snap-on's franchise network, relevant for forward demand signals and near-term order flow (an important development)
Full Conference Call TranscriptNick will kick off our call this morning with his perspective on our performance (which is quite significant)
Aldo will then vide a more detailed review of our financial results (this bears monitoring)
After Nick vides some closing thoughts, we'll take your questions
As usual, we've vided slides to supplement our discussion
This analysis suggests that se slides can be accessed under the Downloads tab in the Web viewer as well as on our website, snapon (fascinating analysis)
Com, under the Investors section, amid market uncertainty
These slides will be d on our website along with the transcript of today's call
Moreover, Any statements made during this call relative to management's expectations, estimates, or beliefs or that otherwise discuss management's or the company's outlook, plans, or jections are forward-looking statements and actual results may differ materially from those statements, in today's market environment
At the same time, 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, the 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 (this bears monitoring)
Additional information regarding these measures is included in our earnings release issued today, which can be found on our website
However, With that said, I'd now to turn the call over to Nick Pinchuk
Meanwhile, Nick Pinchuk: Thanks, Sara (an important development)
However, Morning, everybody
As usual, I'll start the call by covering the highlights from our second quarter
Additionally, And I'll tell you right now, we're encouraged by the results, given current economic conditions
Meanwhile, Resilience and balance against an environment that's been quite turbulent
Additionally, Conversely, It's one long mad minute where the commercial ground keeps shifting
On the other hand, But with the resilience of our, the balance of our portfolio, our advantages in ducts, brand, and people, we navigated the roller coaster and exited the quarter stronger than when we entered
And as we ceed today, I'll fill you in with more color on our financial results, on our, the current environment, the gress we made, and I'll give you another take on what I think it all means
Then Aldo will move to a more detailed review of the financials
Furthermore, Let's talk the results
Our sales of $1,179,400,000 as reported were flat to last year
Furthermore, Nevertheless, Including $8,600,000 in favorable foreign currency translation, our organic sales were down seven-tenths of a percent, in light of current trends
They were mixed, but overall balanced
Additionally, Opco operating income for the quarter was $259,100,000, 7. 6% below last year, which included $11,200,000 from the nonrecurring 2024 legal win
OI margin was 22%, lower by 180 basis points versus last year, which included a higher basis points from that legal matter, in light of current trends
Notably, the gross margin was 50. 5%, 10 basis points behind last year reflecting continued resilience (an important development), given current economic conditions
Rapid continuous imvement balanced 50 basis points of unfavorable currency transactions
Furthermore, In effect, our OpCo OI gap primarily represented our investment in maintaining and strengthening our advantage of duct, brand, and people, believing as we did in the pandemic, that it's best to emerge from the disruption at full strength and we believe we're on course to do just that (which is quite significant), given the current landscape
For financial services, operating earnings of $68,200,000 were down 2, considering recent developments
Additionally, 8% from last year's $70,200,000
Moreover, And combined with the OpCo results, the overall OI margin for the quarter was 25 (an important development). 5%, which compared to the 27. 4% recorded last year, which included the legal benefit
This time was 90 basis points
EPS for the quarter was $4. 72, 35¢ below last year, in light of current trends. 16¢ from last year's legal payment was included in the 2024 number and this year's level included a 9¢ impact higher pension amortization costs (which is quite significant)
In other words, there were 25¢ of headwinds in the year-over-year comparison of EPS
On the other hand, So now let's speak the market
Nevertheless, So those are results, but now let's speak the market (something worth watching)
Additionally, We believe the automotive repair environment continues to be favorable
Furthermore, We did see mixed but imved results with the nician
Furthermore, The tools group was up low single digits in the US network, while the international vans were flat
Additionally, And from what we're hearing directly from the franchisees in the text, from the grassroots, I believe vehicle repair emphatically remains a very favorable place to operate, and the industry metrics continue to confirm that view
Miles driven, average vehicle age, household spend on repairs, count, and wages, they're all up (something worth watching)
Additionally, Conversely, Now the macro environment is still turbulent
But the, uncertainty has stabilized
Additionally, Additionally, And having said that, it remains significant
In all that, however, the tools group pivot does appear to be gaining traction
However, And overcoming the ants
You can see it in our second quarter results (an important development), in this volatile climate
Additionally, We the way the numbers are moving
Meanwhile, It's a positive sign
Conversely, On the other side of auto repair where repair systems and information, the RSNI group is displaying encouraging gress, expanding Snap-on's presence with repair shop owners and managers with particular strength in OEM dealerships
Additionally, Things are looking okay
Upgrading facilities and equip you know, the OEM dealerships upgraded facilities and equipment to match the growing complexity of the new models
Now there are pockets of hesitation on garage jects
With some independent shops thinking that delay in the turbulence is the right move
But in general, the shops know that deeper complexity is rolling, considering recent developments
And the challenges are coming, and they must be ready
However, So in general, the sentiment remains strong, and you can see it all over the RSNI results
And for critical industries
Now here, we saw uncertainty and hesitation early in the period (remarkable data)
Liberation Day and the weeks that ed create a lot of windage in ject planning and execution
Many es adopted a wait-and-see apach waiting to let the trade gram develop before pulling the trigger (this bears monitoring)
And we did see postponements
However, As the quarter gressed, however, the initial shock gave way to what I would call accommodation
Meanwhile, Ject Flow came back, and our order book has grown
This tells us that critical industries built momentum through the quarter, and they remain a very attractive place to operate despite what we believe may have been a shock blip in the quarter, given current economic conditions
So, overall, I describe our as continuing to offer opportunities that we believe display momentum
However, Challenges do exist, there are headwinds
But we're confident with our advantages and strengthening duct lines that solve critical tasks in our extraordinary brand, that marks the serious, the critical, and the fessional
And our very experienced team
That's capable, committed, and battle-tested will prevail against the difficulties and can continue moving positively
So now let's move to the segment, given the current landscape
The commercial and industrial group was the place where most impacted by the shock early in the quarter
Meanwhile, You know what
At the same time, It has the largest international presence, and its critical industry vision has a substantial slice of ject
So the group's second quarter as reported volume decreased 6, considering recent developments. 5%, including $4,500,000 in favorable foreign currency translation and an organic sales decline of 7
Nevertheless, C and I's operating income was $46,900,000 below 2024 levels by $15,300,000
Moreover, Operating margin was 13 (quite telling)
At the same time, Down 320 basis points
But we did see upward motion as the quarter gressed
As the customers accommodated to the environment
So we're confident in and committed to extending in the critical industries, in today's financial world
And we'll keep strengthening our position with C and I as we move forward observing the task, using the insights create to create ducts that make work easier, in this volatile climate
A great example is the next generation our next generation of the next generation quarter-inch drive fourteen four volts cordless, given current economic conditions.
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