Snap-on Incorporated (SNA) Earnings Call Transcript & Summary

Good morning, and thank you for joining us for the Snap-on Inc. fireside chat. With us today, from the company, we have CEO, Nick Pinchuk, CFO, Aldo Pagliari, and Director of Investor Relations, Sara Verbsky. Thank you, everybody, for joining us today. Before I turn the call over to Nick to give us some opening remarks, I'll just remind the audience that at any given time, if you have a question that pops in your head, please populate it into the system, and I will work it into my questions as well. So with that said, Nick, the floor is yours.

Okay. Thanks, Scott. Good to see you again.

Pleasure.

Actually, I think that my opening message would be more like this. These are -- as everybody knows, are interesting times, but I think these interesting times have underlined, deemphasized the strengths that Snap-on enjoys. We always said that we're focused on the critical. In other words, we solve problems where the penalties for failure are high and the need for repeatability and reliability are justify a Snap-on level product. And we have -- we bring some strengths to that. We have a tremendous product line, 80,000 SKUs, and it keeps growing as cars and other items keep changing. So our product line is very strong. We have a brand that is the outward sign of pride and dignity, which working men and women want to display this brand, and we have a number of great business models, not the least of which is the Tools Group, a direct model, which I think has fallen from Saturn, I didn't invent it, but it's a great strength, even in the times when people thought that direct wasn't going to be any good. And then we have a credit company that isn't really a credit company. It's a strategic organism that wheels credit to support our operations. And it all played out in these last few months. We were saying back in the second quarter of 2020 that we thought because of the essential nature of our business that our customers and our team got -- we're passing through the shock and going on to a V-shaped recovery, and that's what happened. We've been above when we -- when other people, I think, are now starting to talk about comparing to 2019, in some cases, at least on the talk shows in the morning or the financial shows in the morning, we've been talking about it since the third quarter of last year. This is the fourth straight quarter our business has been above pre-pandemic levels. Last quarter, the second quarter, we were at 9.3% sales above 2019, the same period in 2019. And our OI margin was 20.1%, up 10 basis points, but that was again 70 basis points of unfavorable currency and acquisitions. The Tools Group, which everybody talks about, and as a direct business, was up 17%, and they were up 380 basis points. So I think you can say that we've encountered the shock of the virus, the great strengths of our organization have allowed us to shake it off, and we have emerged stronger than ever before.

Great. And just kicking things off from my end. With regards to the automotive-related businesses, whether it's in the Tools Group or in RS&I, can you talk about the health of the end markets, what you're seeing at the shop? And maybe also talk about the technicians, the mechanics, how they're doing?

Well, I think the mechanics are doing great. I mean they've been doing great for a while. I traveled all around. I actually -- you can travel in the United States, and I have been since late second quarter last year. And when you visit the garages or when you visit our franchisees, who in turn, visit those technicians every week, the same guys every week, we can see them, they only talk about positivity. What happened was, of course, like everyone else, as I said just before in my opening remarks, they were shocked in the beginning. But then they learned how to accommodate. And when you talk to them now, they are -- our franchisees are pumped and primed. I was just with almost all of them, 85% of them, almost 90% of them in Florida for our Snap-on Franchisee Conference. And I can say I've never seen them more excited about their business. Because what's happened is, in the pandemic, people have, I think, reversed where they were kind of leaning towards being urban and maybe share transportation. We see them leaning back the other way. And so we see that prospects expressed in our technicians and in our franchisees. They are very positive about their future. And 17% growth over pre-pandemic levels kind of creates a testimony to that. And so you see a kind of strength. And we knew that back in 2000 -- back in the second quarter last year, which is why we declared. Then, in 2020, we declare we're going to keep investing in product we did. We kept investing in our brand. We kept our racing programs and other things going, and we never laid anybody off because we're investing in our people because we knew just as we started to accommodate, there would be great opportunities, and we wanted to be at full strength and we are. So that's worked pretty well. The garages themselves are generally coming back. They came back a little slower because the bigger the organization, the more careful they are about the future, but they have the same positive view. And you can see the upward tick in that situation. I think our RS&I business was up by 8.4% organically in the quarter, which is company -- the part of our company that sells to the repair shop owners and managers. So the repair sector is as resilient as we expected it to be maybe even more so.

Got it. And layering on the question that we just got from the audience. It says, we are seeing inflection in mechanic wage rates by some accounts upwards of 15%, are you seeing an inflection in your customers' buying power?

Well, I don't know. I mean I think it is that the 12-year -- the year-over-year and trailing 12 months numbers aren't quite that high. So I think 15% might be a little bit situational, but I think going forward, you're going to see that because as the cars get more complex, the skills have to be stronger and stronger to repair them. And naturally, the repair guys are going to have to be more capable. If you think about this, I think this is a -- this is the wave of the future, maybe not 15% in all one pop, but I think there's a natural tailwind behind technician's ability to buy. And it's this, as new technologies, new powertrains come to the market, the technician is going to have to be even broader in dealing with a number of different and more -- increasing -- in different powertrains, in different vehicles, different types of vehicles and different -- with even more complexity. So as new powertrains come through, more hybrid, more electric vehicles, more plug-in hybrids together with the internal combustion engines, which are not going to disappear that quickly, you just have to look at the arithmetic. Those technicians are going to be more and more priced in terms of their skills, and Snap-on is somebody who can put them right on target and enable them. That's why we think their wages are going to go up. And we think this is going to be the golden age for Snap-on going forward.

Got it. And maybe just talking about tools specifically, a lot of questions about how much is structural to your business related to the rebound and how much of it is just the business, just doing better from a demand standpoint, from the economy. Talk about some of the things that you have done to put your franchisees in a better position to capture this growth.

Yes. Well, look, I think our view is this is that Snap-on is -- we, in some ways, make the market. In a lot of situations, people decide to buy Snap-on like a Snap-on box that they don't buy or they decide to buy Snap-on or if they needed this product, they look at a whole bunch of others. So in a lot of ways, our growth is dependent on ourselves and that is dependent on a couple of things. I think that's important. It's driven underlying by the rise in complexity of vehicles, which has occurred and they need more and more different types of products to engage that complexity, that's one thing. Secondly, it is the types of new products we bring out to match those, the compelling nature of them and they often are, we keep investing in that; and thirdly, in that technician business, it's the capabilities of our franchisees. In other words, the time they have to sell those more complex vehicles -- those products to the customers. And what we've done, over the last several years, is we've been investing and trying to figure out how to give our franchisees more time. They only have 24 hours a day. So how do you give more time? The idea is to reduce some of the ancillary stuff they do like taking inventory or other things and to try to help them make the most to that -- those few minutes, they have to engage the technicians. Remember, they see the technicians every week, they probably have 7 minutes to engage them. And sometimes they have databases that are $220 billion units to try to pitch in that situation. So we've done a number of things: One is we've improved training. We figured out how to work on training and so it sticks in a lot of different ways. We figured out how to use demo units more effectively. That's one. Two, we've harnessed social media much more effectively, and that's happened through the COVID. One of the things about the COVID is, we had to depend on what we learn new things. And specifically, what I mean is we've learned how to presell. So we don't sell over social media, but we get to the customer and we brief them on, oh, this is a new product. And here's why it would be good for you or this is a new promotion, here's why it would be good for you. And so when the franchisees is in front of the customer, he doesn't have to take time familiarizing himself with the -- familiarizing that customer with something, he can just try to close the deal. And that's workforce. And then with Kaizen or rapid continuous improvement, the operations on the van continuously through this downturn. And that has brought us, I think, to a new level, we've enabled the franchisees with more capability, more efficiency on the van. And that's what supported the 17% growth because probably the leading indicator -- not a leading indicator, but the principal barrier to us selling more is having the right product because the market is changing and it's there all the time, and it's growing. And then having our franchisees have the time to pitch those products. And we've gotten to a new level. You can see it in the third quarter and the fourth quarter of last year, first quarter this year, second quarter this year, 4 quarters now with that it's clear we've broken through with new level.

Got it. I'm going to jump to a question from the audience, and it's related to supply chain, any delays in inflation, how this is impacting your business right now?

Well, it's been impacting our business for some time in terms of -- everybody has been talking about this stuff. And part of our situation is -- part of our task as managers is to deal with this. And yes, we had a good dollop of material cost increases in the second quarter, but we were 20.1% of OI margin, 10 basis points before we entered the pandemic. And that offset 20 basis points of bad currency and 50 basis points of acquisitions. So 70 basis points of -- so I would say, external things. And we ate whatever we got in that quarter, and we ran through it. Now of course, we will be challenged as we go forward. Our job is to kind of manage over it. We don't see it as a major headwind now, I knock on wood, just -- we don't give guidance, but our job is to try to manage through some of this. We haven't seen much disruption right now. We've been able to manage around it. But again, disruptions can come up. So I'm not forecasting anything, but we're able to manage through them in the last quarter. Tools Group was up 380 basis points versus 2018 -- 2019. So I think we're able to deal with it.

Got it. And jumping back into the Tools Group. It seems like everything is -- did well the last couple of quarters. Hand tools, can you maybe talk about some of the bigger ticket items such as storage and diagnostics?

Sure. Let me just add though. One of the reasons why we're reasonably positioned if you come back to our sourcing question, it's one of the reasons why we're reasonably positioned is we are a heavily vertically integrated company. So we add a lot of the value for ourselves. So we're not so dependent on the components as -- components of some other people might be in many of our businesses. But you come back to the tools, the products we have, the big ticket items, look, in the last quarter, everything sold well versus 2020. It's almost not worth comparing to -- but if you look back versus 2019, tool storage was up nicely, diagnostics were up in there. The 2 principal -- they're both up nice double digits in both that quarter, so they did -- I think, hand tools was up the most still, but still big ticket items were fairly strong. So I think we were very pleased about our position there. And what happens for us is when we see the big ticket come back, it tends to say that our customers are -- we are getting more psychologically recovered from the pandemic. Like we said, we described the pandemic in phase of shock, we accommodate to what's there. And you've got to recover psychologically and believe in the future and our technicians are believing in the future. That's why they're buying a little bit more of that. And I would expect that to sort of continue. It varies from quarter-to-quarter. You can get balled up if you look at quarter-to-quarter and try to figure out what sells and what product lines because it can be affected by product that's launched in the quarter and so on. A lot of different things can be there. But if you look over time, you're starting to see that stuff come back. So that's a pretty good indication of how positive technicians are. I've said before about the auto market, the auto repair market, our technicians, our franchisees, they're not going to get shocked again. No matter what happens, I think this keeps doing because they know they've been through bad times and they accommodated it. So they're just going to keep rolling. I'm not so worried about the future in that situation in terms of what happens with COVID.

Got it. I got a question from the audience. And it basically says from 2014 to 2019, there really was no organic growth. I guess this was talking about the Tools Group. What will make 2000 through -- 2022 through '24 any different?

Well, I don't know if it was -- I don't know if there was no organic growth. That's a little overstatement, but organic growth was somewhat flattened during that period. I mean, look, I think this -- it's just -- this is kind of a situation. I think -- look, we -- in 2011, we broke through to a level when we determined how to help our franchisees by putting in the field company-owned vans that would sort of like timeshare with franchisees on a periodic basis, help them sell tool storage and diagnostic units. We call them the Rock N' Roll Cabs and the diagnostic units. And in fact, between 2011 and 2016, I think, the Tools Group, those 5 years, Tools Group grew, I think it was 7.6% compounded annual growth rate. So in other words, we gave the franchisees, we brought them to a new level. And what happens sort of, I think -- and I said this on calls, what happens toward the end of that, we started to plumb -- if that's the expression, plumb the roof of those capabilities, and we have gotten as much out of it. We didn't go backwards, but we were having difficulty breaking through again and so we worked on it through that period. There was some growth and some things work, some things didn't. But then as we got into 2019, we started to see some success toward the end of that because we're starting to do being successful on some of the things I talked about. And I believe that we broke them through again. And so that's the nature of our business. I say we're going to grow at 4% to 5% compounded annual growth rate in the Tools Group would be in that range. And -- but I didn't say it's going to be every quarter like this. So we do break through at times. And what we have here, I think -- I think most of us believe this, is that we have a breakthrough and there's testimony in the tools and in the Tools Group numbers. 4 quarters in a row now, pretty good numbers. So I don't know how many you have to have, to happened to be a trend.

Got it. And Tools internationally, we've seen some very nice growth there, even in your stack, talk about about the differences?

Yes. Yes, Tools internationally is growing about the same. I mean, sure -- and what I'm talking about here is Canada, the U.K. or Australia. I don't know if you have what you think of the U.K. economy. I don't think it's that good with Brexit and stuff, right? Yet they're growing like the Tools Group in the United States. And so what I would suggest to you is a lot of people say, I've heard this question before, well, it's a stimulus, stimulus is being spent. Well, when I go out and talk to franchisees or certainly when I talk to technicians or people in factories even, they say, hey -- I'm talking about the second stimulus now, not necessarily the first. The second stimulus people say, "Hey, I'm banking it or I'm paying down my debt. " They didn't go out and buy something. They thought I'm going to save for a rainy day now with this stuff. And so -- that's what we think we see. We think we just saw a kind of natural progression, not aided in a big way by the stimulus. And part of the testimony to that is that Australia and Canada and the U.K. match those growth rates in the United States and there ain't no stimulus there. So this is sort of -- just -- I think it's part of coming out of the downturn, too, but I think it's all about breaking through that barrier and having the right products. The markets get more complex, there's a need, we break through the barrier and we have the products to make that, to meet that need. This is what's happening in Snap-on. It's very simple.

All right. And talking about RS&I. We started to see a nice rebound in the second quarter, still trailing what we've seen in Tools, but maybe talk about some of the end markets there if that's the OEM for under undercar.

Sure. Undercar is coming, but undercar had been painful, painful during last year. I mean what happened was is that even as the technicians have started to accommodate and move on to what we call psychological recovery, the repair shop owners and managers were still a little reticent. And so they were reluctant to invest in kinds of things undercar equipment sales. These are things like lifts and tire balancers and aligners and so on. Now we're seeing that coming back strong double digits. So the last couple of quarters, we started to see the light in the first quarter. Now we saw really robust rebound in this quarter. If you look at repair shop, repair and information products for these shops in the RS&I group, things like diagnostic units or just software that runs a shop, they were all pretty nice. The variance in there is the OEMs businesses, which are the kind of project businesses, both in Europe and the United States, which tends to be kind of lumpy. And so that still is moving up and down and the profitability is again lumpy in that situation. So you kind of see that RS&I had a pretty good quarter. I think -- we think what was it up 8.4% organically over 2019 levels. It was up, last -- I think it was up 50% over last year, but 8.4% organically over 2019 levels. So that was a pretty nice volume number. Now its margins were down, it was 21.8%, down about 350 basis points, 170 basis points of that was currency and new acquisitions. And the rest was pretty much mix, that, as you said, Scott, the equipment business is rising precipitously, and that tends to be because it's a hardware-based business tends to be a lower-margin business. So you see business pick, still 21.8% each shop level, and so we're okay with that at high volume.

Staying within RS&I, the dealer FX acquisition gives you some nice increased content that you can gain with the dealers. Can you maybe talk about that?

Sure. Look, I think -- think of it this way. We like the business of having software that enables repair shops. Actually, the Mitchell 1 business, which has been with us for a long time since before I came, is one heck of a business, a great business. And what they provide repair shop information, plus they provide repair shop management for truck and light vehicle independent shops, not dealers because it's a different cadence in those places. So we had that business. Now you have the dealerships, well, dealer FX is sort of that business, repair shop management software for the dealerships. So we like the repair shop management software business itself because we've seen it. And we know a lot about it because we've seen it in Mitchell 1 and so moving into it in for dealerships, the other side of that for OEM dealerships, was a natural move for us, and we think it's a long-term winner for us. Now there's another strategic implication here and that is, as you see more change, more complexity, whether you're talking about electric vehicles or plug-in hybrids or more autonomy in the vehicles, we have a hierarchy of alerts on this. One is we spend time with the OEMs themselves, and the OEMs tend to engage us -- they engage others, but they also engage us, to put together packages to support that new vehicle or that new feature in the dealership. So you're bringing out a new autonomous, let's say speed control system or a new autonomous guidance system. They would probably engage us or someone else to put a set of tools in the dealership to be able to maintenance that. That's what the OEM thinks is going to be needed. Where we -- that's our first line of understanding what's going to be needed with the new vehicles. Secondly, then those vehicles get out there. When they first start to get actual practical problems, which at many times are not what the OEMs thought they were going to be, they go to the dealerships. Well, if you haven't -- if you're doing the repair shop management -- software, you have a good view of what's going wrong in the dealership, you start to understand that. You're in the dealerships a lot, you start to understand that. Then they move into independent shops and we have the independent shops with repair shop management, and we get to see what happens after the cars like are off of warranty. And then on top of this all, so all of that tells you what goes wrong in the vehicles. But then there's one other thing. What goes wrong isn't the whole story. Let's say, the motors that are driving, the wheels and an electric vehicle go wrong. Well, the fact that you know that gets you ready, but you may not know that on this particular electric vehicle, you need a special tool. And that's why being in the garage with our franchisees and our own people allow us to adjust that tool. So we have like a -- now we have a 4-part warning system to guide us. And the gap in that was running the deal, having the software in the dealership and the repair shop management of dealership. That's why we acquired FX from a strategic point of view.

Talk about EVs, how you're positioned to take advantage of that. You did mention on one of the last calls, you do have some agreements with some of the OEMs for some new EVs that are coming into the market?

Yes. Yes. It's sort of the first part of that hierarchy. You remember I said it was a 4-part hierarchy, and we cooperate with the OEMs when -- as they bring out a new vehicle, you pick the vehicle, but as they bring on a new vehicle, it doesn't have to be EVs. But right now, it happens to be that we have several with a new EV coming out for various manufacturers, and they say, "Hey, when this car gets into the dealerships, it's different from prior cars. So it's going to need these special tools. " They call them Essential Tools. So we put together a package with those essential tools. So we're starting to get that as the first indication of, okay, the EVs are starting to come. That's the first view of what it's going to look like in repair. We can speculate when we look at the car, like the OEM, but the OEM engages us, so we get some, I guess, early warning intelligence on that. So that's what's happening. And so there's things like a set of tools that are maybe insulating tools that keep you from getting fried when you work on an EV, which might have battery lifters, things like that because the batteries can be problematic themselves just in the weight of them all, things like those things.

Got it. C&I? [indiscernible] markets?

C&I. Yes, look, I think it's kind of a mixed bag in C&I. What you're seeing is -- what you see there is in the critical industries, general industry doing well, heavy-duty strong, education roaring back because the students are coming back. So we view education as a critical industry because we're making Snap-on customers for life. Aviation has been bouncing back and forth, international has been bad, domestic has been weak from time to time. Oil and gas is still, your guess is as good as mine, mining the same time, mining is a little bit better, but oil and gas certainly down. The military has gone down. Since the Biden administration, it's been down. Usually, we see these things fluctuate. Military is a great business, but it tends to fluctuate. So that's been down. So that cocktail has sort of made a kind of flatness there in the United States. But when you move into Europe, our European hand tool business, SNA Europe, is defying economic gravity. It's up strong single digits in the quarter, and it's been up several quarters in a row. And it's basically doing that. A couple of things, it has got good relationships to the customers, and it is moving more and more towards customization of tools. They have something called the Bahco Ergo Tool Management System where they had been just a distributor business, selling completely through distributors. Now they're selling them through distributors still, but a lot more direct customer contact, and that's played out well for us. So that's done fairly well. So you have that balance in C&I. And then you go to Asia Pacific and Asia Pacific is kind of a mixed bag. Northern Asia has been okay, particularly China, Japan, even though everybody is moaning about Japan has performed pretty well. Korea is okay. India, basket case still. And Southeast Asia is kind of in between there, kind of weak. So you have some mix there. You roll it all together, C&I's kind of moving upwards they -- the quarter was only slightly up last time because you had the military down quite a bit, but the profitability was pretty good. 15.8% up over 2019 by 120 basis points, and that's against 90 basis points of unfavorable currency and acquisitions. So they had a gangbuster this quarter from a profitability point of view.

Got it. We're going to turn to a question from the audience. It is talking about the long-term margins for the company as a whole and for the Tools segment, the tools EBITDA margin is in its highest level that it's ever been. Is there a further upside from 21%?

Sure. I mean the tools business is one of the greatest businesses. Okay. I'm a CEO. So maybe I shouldn't say. So the tools business is a very strong business, and we see upside as we make more of our franchisees, that's one. In other words, that's basically some scale as you spread those franchisees out, you get scale in that regard. But the most important thing here is just like we opened this conversation, talking about the rise in technician wages, which creates an underpinning economics but also just the natural idea that the cars are getting more complex. Every year, they're more complex. And interestingly, they're getting more and more fly by wire, so our diagnostic units add more value and our calibration units for autonomous vehicles add more value. But amazingly, is that as this has happened, and we've seen it like a 20-year trend, and it's accelerating now is the need for hand tools has only gotten bigger. And so we see that continuing. And so we see the opportunity to bring out new tools to engage this complexity, which is harder to repair as margin opportunity as well for us. So we see the Tools Group being able to go up. And I think there are logical reasons for this.

So what about the credit portfolio and I guess, how the -- you had another ultimate stress test last year. Just talk about the strength of the model.

No kidding. Actually, look, the credit company -- the credit company, I'm saying it's been through 2 stress tests. Now you got -- you had the financial recession, which they came through with pretty good unscaled. And then you have this pandemic when places were closing and people were worried about what was going to happen, how much more of a stress test could there be. This is probably the most worrying period in my lifetime. And yet, they came through -- if you look at our delinquency rates, delinquencies go up and down, and they were improved last quarter. I think we're down, we were 1.2 versus 1.6 to 1.7 in the prior quarter. But that isn't the point whether it goes up or down, it stayed pretty in the same range. It might go up, might go down, but stay in the same range because the credit company is rooted. In our franchisees, knowing the technicians, knowing who to lend to and seeing them every week, it is rock solid. And the other thing that came up in the downturn was the credit company is one of the reasons why we're able to go to the V-recovery is because during the deepest portion of the crisis, they provided forbearance in terms of delayed payment for their loans from customers and from franchisees. And the reason we knew what we were doing is because we did that many times on localized problems like in hurricanes, Hurricane Sandy, superstorm Sandy or Hurricane Harvey or Katrina in a localized way we did this, and we knew just who to loan to and how we would get paid back, and that's exactly how it played out. So the credit company has survived 2 great stress tests. And in the last one, it has shown its a great strategic value, which is an asymmetric advantage for Snap-on versus any of our competitors.

Got it. We have a few minutes left. Last question. Aldo, maybe you could take this, talk to me about the balance sheet priorities for cash flow from here?

Well, the balance sheet is in pretty good shape. Obviously, as Nick has described, we weathered the 2020 COVID period with strong working capital performance and particularly in receivables, including the credit company as well as the trade receivables. So as a result of that, we exited Q2 at $965 million worth of cash. Since that time, I'm not going to comment too much about the specifics of Q3, but of course, we retired the debt that matured on September 1. So now we have no debt on the horizon that is coming due, and we have no undrawn amounts under our revolver. So the balance sheet is prepared to be able to invest in M&A-type transactions, organic growth and of course, the dividend is important to Snap-on as well. Having said that, I think those are the key ingredients for continued success, organic and inorganic growth recognizing that part of the investor base is sensitive to dividend. So Snap-on is aware of its dividend history and philosophy, unreduced and uninterrupted and have been growing in recent years and also share repurchase has a role to play. Like many companies in Q2 of 2020, we abstained from share repurchase. But if you notice of late Snap-on's been spending $200 million to $300 million annually on share repurchase. So there is a role for share repurchase, and we try to take advantage of opportunities when we feel the stock might be undervalued or less appreciated by the market than what we see. And capital investment, probably no sea change. So we earmarked that we'll spend $90 million to $100 million, which is over the $80 million run rate you might have had in earlier years, but I don't see us doubling CapEx if there was interesting enough projects, sure. But I'm just saying I don't see a sea change in capital expenditures. It might go up from $100 million to $110 million, $120 million in the next couple of years. But it's hard to manage projects skillfully. So again, I don't think there'll be a radical change in CapEx deployment.

All right. I would just have one final question from the audience. It's regarding the franchisee count that's been at about 4800 for the past several years. Are there any plans to increase that?

No. Simple. No, look, we believe -- look, not that we couldn't add 1 or 2 or a dozen or something like that. But generally, we believe we make the best out of getting loyal franchisees that are fully dedicated. And part and parcel of that contract is you are our people. We're going to help you make more money and have a better business. And so part of that is we think we've got proper coverage in this situation. It's just about breaking through and enabling that. That's why we're not looking to add. It's easy, when you add, of course, you get an instant pop because you facilitate those vans, you load them up with product. But we're not really looking at that. We now have a nice even flow. The flow of demand is every bit as robust as it is on demand. And so we like where it is now, and we see them getting expanded. Right now, they're at a new level. So there's no reason to even think about that at this point.

Got it. We are out of time at this point. So I just wanted to thank everybody for joining us. Thank you, Nick, Aldo and Sara. I appreciate your time today. And this officially ends the Snap-on presentation.

Thank you, Scott.

Good to see you, Scott.