Snap-On Incorporated

Good morning and welcome to the Snap-on Incorporated 2024 First Quarter Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Sarah Verbsky, Vice President, Investor Relations. Please go ahead.

Thank you, Gary, and good morning, everyone. We appreciate you joining us today as we review Snap-on's first quarter results, which are details in our press release issued earlier this morning. We have on the call Nick Pinchuk, Snap-on's Chief Executive Officer, and Aldo Pagliari, Snap-on's Chief Financial Officer. Nick will kick off our call this morning with his perspective on our performance. Aldo will then provide a more detailed review of our financial results. After Nick provides some closing thoughts, we'll take your questions. As usual, we've provided slides to supplement our discussion. These slides can be accessed under the Downloads tab in the webcast viewer as well as on our website, snap-on.com, under the Investor 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 that otherwise discuss management's or the company's outlook, plans, or projections are forward-looking statements, and actual results may differ materially from those made in such statements. Additional information and the factors that could cause our results to differ materially from those in the forward-looking statements are contained in our SEC filings. Finally, this presentation includes non-GAAP measures of financial performance, which are not meant to be considered in isolation or as a substitute for their GAAP counterparts. Additional information regarding these measures is included in our earnings release issued today, which can be found on our website. With that said, I'd now like to turn the call over to Nick Pinchuk. Nick?

Thanks, Sarah. Good morning, everybody. As usual, I'll start with the highlights of our first quarter. I'll provide my perspectives on the results, on our markets, and our path ahead. After that, Aldo will give you a detailed review of the financials. We believe that our first quarter once again demonstrated Snap-on's ability to maintain its strength, to engage headwinds, to manage challenges, and to leverage the multiple opportunities of our markets. Looking at the results in total, we are encouraged. Like most quarters, we had turbulence from geography to geography and from operation to operation. North America was mixed, but with significant gains in critical industries. Internationally, our consolidated results were also mixed, but yielding overall positives as our operations in Europe and Asia overcame the effects of recessions in Europe and the delayed recovery in China. Now the results. First quarter sales were $1,182.3 million, about flat to last year. On an organic basis, excluding $6.7 million from acquisitions and $2.5 million from favorable foreign currency, our sales were lower by 0.8%. OPCO OI was $270.9 million, an increase of $11.1 million. And the OPCO operating margin for the quarter was 22.9%, up 90 basis points. Now, both those numbers benefited from the legal payment referenced in our release. But with or without that legal flow, our first quarter OPCO OI and the margin were among our best. It's a strong statement given the turbulence of the day. Financial services operating income grew to $68.3 million from last year's $66.3 million. And the result combined with OPCO to raise our consolidated operating margin to 26.5%, up over the 25.6% recorded last year. And EPS, it was $4.91, including a per share benefit from a legal payment of $0.16, but up $0.31, or 6.7% from last year. So those are the numbers. Now let's turn to the markets and the trends we're seeing as we connect with our customers. From an overall perspective, we believe the automotive repair arena remains favorable. Vehicle OEM and dealerships continue investing in tools and equipment, preparing for the tide of new models, bringing the latest technologies and drivetrains to the market. And in the quarter, our Repair Systems and Information Group, or RSI as we call it, expanded our reach into OEM programs and took advantage of the opportunities throughout its global footprint. And as we look forward, we see further prospects for RS&I capitalizing on that trend, supplying dealerships and independent garages with just the products they need to confront the wave of modern platforms that are coming. So the shops are strong. Now let's speak of the technicians. The guys and gals that twirl the wrenches, punch the keys, or tap the screens. This quarter I had multiple occasions to visit with franchisees, and the report was generally that shops are humming, the bays are running at full capacity, and all that mirrors what the macro data says nationally. The car park is continuing to age, now at an average of 12 1⁄2 years, and I think moving up. Technician wages are rising, and their hours worked are increasing. We believe it all signals ongoing and robust demand for repair.