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

Next in the lineup today, we have Snap-on, and I'm very pleased to have Nick Pinchuk, Chairman and CEO. So Nick, I would love it if you could give the audience some background on Snap-on, the business mix between the 4 reporting segments and who the core customers are of those segments and then the overall addressable market?

Sure. So one of the things I think that people don't always think about Snap-on is we are in the auto repair business, which doesn't have much to do with the auto manufacturing business. This is one of the things that I think that people don't quite realize. I was at Ford for 10 years myself and worked under the Vice President's floor, the kind of thing -- I serve the drinks in some of the meetings, things like that. And you never saw the parts and service guy in the building. They worry about new cars, they don't worry about repair. So ours is quite a different business. And so that is essential to understanding us our sort of iconic piece of the business is the Snap-on Tools business, which basically has in the United States, 3,500 franchised vans, white trucks, which Snap-on on the side and people all know this, and another 1,300 outside the United States in different places like the U.K. and Australia and so on. And that's about 40% of our business. And the unique thing about that, I think, is they sell to the actual user the end users, the guy who twirls the wrenches, the technicians in the shops. So in a way that creates a distinctive nature for Snap-on because maybe one of the few manufacturers who have raw material coming in the back of our factory, and we go all the way to put it in the actual hands at the end user. So it creates a deep understanding of the marketplace. So it's one thing about our business. We can talk about that later. But it's a business everybody thinks about when they talk about Snap-on, great brand, iconic and it's the outward sign of pride and dignity that working men and women take in their profession. Then we have a second group, which we've organized more recently, not so recently, like [ 50 ] years ago now, but they sell to a different customer who stands right next to the technician. That's the repair shop owner and manager, whether you're talking about a dealership or an independent repair shop. And they sell through a completely different distribution network, selling through direct or through the distributors, and they basically make what I would call semi-capital products, whereas the Tools Group would sell out of a huge array, 40,000 SKU catalog of hand tools and power tools and diagnostics and so on, which a technician will use, these are more like semi facilities. So repair shop management software systems, electronic parts catalogs, lifts that raise up the car, so you can work on it, aligners and balancers and things that would calibrate the new automated dealers driver assist systems. And that's about 28% of our business, grew about -- oh, I want to say 12.3% in the quarter, and the margins were 25.3%, up 50 basis points year-over-year. And then there's another piece of the business, which is called the commercial and industrial business. That's about, let's say, 26% of the business and 27% of the business. And this is sort of rolling the Snap-on brand out of the garage to other customers. One of the things that's a unifying theory about Snap-on customer base is that we sell in the critical. So we sell to people who are working on tasks where the penalty for failure is high and the need for repeatability and reliability justify a premium product like Snap-on. We really don't sell any place else. For example, if there's any commitment at Snap-on, it's -- that Shelnut sell to DIY, do-it-yourself people. We do not do that. And so that business sells to customers that are in, say, the military if you're -- the 50-caliber bullets are going overhead, I think repair in your vehicle may be pretty important to you, pretty critical as we would use or oil and gas or aviation or heavy industry or heavy-duty truck, things like that. And that tends to be more international business for us. So while the first 2 businesses I talked about, the tools business or the RS&I business, they would be 75% in the United States, 70%, 75%. The C&I business will be 45% in the United States. So it's a much broader business. And that particular business is where we say we roll the Snap-on brand out of the garage. Then finally, we have a credit company, a couple of billion-dollar portfolio. And pretty much it's associated with the Tools Group. The van business, which sells to the technicians. 85% of that portfolio is focused on financing big-ticket items like big tool storage boxes, which are $10,000 and come off the van or diagnostic units, which would be -- could be that much money. And they finance them over a 4-year period. That's part of the business. Then there's financing of the franchisees themselves, their trucks, their inventory and so on. And then there's a small piece of the business which works with RS&I that gives financing to garage owners. So that's the summary of our business. It's pretty much a business rooted in auto repair, except for C&I were rooted in the criticality, 70% of which is auto repair. It -- and it is organized by customers. The Tools Group sell into those technicians in the garage. RS&I sell into the garage owners and managers stand right next to them. C&I selling -- rolling the Snap-on brand out of the garage to other critical industries and the finance company, helping out the Tools Group.

Well, thank you. That's very comprehensive. I guess you mentioned some of the key factors that would drive the purchase of Snap-on to a lower diagnostic unit. I mean it's really about that penalty of failure being high there and need to invest in a quality product. And so I guess, how do you think about the macroeconomic factors that kind of drive your business or that you think about when you're planning your business for the next year or 2?

I've now been the CEO for over 15 years. So I was in -- when we had the financial recession, the great financial I was here when we had the great financial recession, I was here through the COVID and in fact, the macroeconomics is not so decisive for our business. People keep repairing cars almost come hell or high water. And so therefore, that's one of the great things about criticality itself is it has to be done. Otherwise, you need the oil and gas, you need -- aerospace keeps going in some cases. Now they go up and down, but auto repair keeps going. Even in the COVID, the garages only stopped for like a blink of an eye. I would say, a couple of weeks in fact. And so in effect, the critical mobility of America had to keep going. So macroeconomics doesn't affect our trajectory as dramatically as other businesses, I think. Generally, sometimes it will affect the mix of our products. So for example, in a recession, and this is what happened in the COVID or the great financial recession, we will see technicians by shorter payback items like hand tools because they aren't as expensive and they see them work right away. Whereas if you invest $10,000 in a diagnostic unit or a piece of software or something or a tool storage box, you're going to see the payback come over a longer period of time. And the level of uncertainty that visits on the mentality of technicians tends to influence the mix of that purchase. But the guiding influence for whether we sell or not has to do in the Tools Group, the 40% of our business has to do with the capabilities of the franchisees, the franchisees, these guys who drive the trucks to sell. They only have 24/7. So to the extent we can enable them more, we see our sales go upwards. Someone asked me this earlier today. I said, "Well, do you get cyclicality between tool storage, let's say, big boxes under $10,000 or smaller items and we do not." What we see is it's all governed by the franchisees' time. So if we expand the franchisees' time and we have a reasonable product, they will sell more. And so that generally is what drives our business. The other thing -- and you can then go to RS&I and you go to C&I. And because they deal with bigger organizations, even a garage is bigger than a technician, even a small garage, does garage. And C&I might sell the commercial and industrial business might sell to, let's say, a manufacturing plant, they tend to be more impacted by the macro economics either by direct effect on our business or the mentality. For example, the dealership business, RS&I grew at what, 12.3% in the quarter, I said, organically and it's up over 30% over pre-pandemic -- 31.3% over pre-pandemic levels. And that's because at the beginning of the pandemic, dealerships and garages to maybe a lesser extent, were impacted by they didn't know what to make of this. Dealers were telling me, "Geez, I'm making more money than ever, but I'm losing my customers. I'm afraid I've spent a lifetime building up these customers, and I don't have cars to sell them, I'm worried about it. So therefore, I'm a little distracted by that." That's kind of going away now. So what we see in our business right now is the technicians are very strong because they've been through the COVID unaffected, and therefore, they have great confidence in themselves. They're not affected by, say, SVC, they're probably not even thinking about that. They probably even don't know what it's about. And so -- and the garages are starting to come back because they're starting to see a return to more normalcy in their system and so the RS&I business as going up. C&I is a little bit weaker because it goes into a bunch of different jurisdictions. You have Europe and you have Asia on top of the U.S. for them. So that's made a little bit of a more of a different cocktail in terms of that business. But generally, the macroeconomics in the Tools Group, not so much an effect RS&I little bit more, C&I more.

And then in the financing arm, right, thinking about what factors would influence whether a customer decides to utilize Snap-on financing.

They all use Snap-on financing. Nobody, well, not nobody, but I think almost every tool storage box that's sold or every big ticket diagnostic unit is financed by the company. So for example, originations were up 19%, 19.3% a quarter, and it matched the sales of the product. People ask us so often, "Well, how come originations aren't up." They were asking us about a year, 18 months ago, you probably remember, originations aren't up, they're down year-over-year, yeah, because we're selling more hand tools and we're selling the tool storage boxes. So generally, there are stories of back when the boom was in Ohio. It has to be in places like that -- of people getting on the vans and peeling off the Benjamins and paying for a tool storage box and cash, but that doesn't happen very often. And when they finance, they generally use our business because it's much more convenient for them. And these are sub, subprime customer who fundamentally might have difficulty getting financing any place else. But we know them so well through the franchisees that we make the subprime customers perform like prime plus in terms of the delinquencies and so on.

Got it. And I guess just kind of thinking about in the last 3 years, there are a number of exogenous impacts on your customer base, the pandemic and subsequent decline in auto and air travel. But then there were the PPP loans, right? So did that impact how your customers thought about spending or investing on tools and on...

Not a technician and a technician should not -- I think generally, the people of work weren't so impacted, people in the factories who we sell to factory. So I spend a lot of time in factories or in the garages, none of that really accelerated or changed anything. They pretty much said, okay, PPP loans would be more for the garages, not so many people took advantage of that. I think, at those small-level garages, maybe some dealerships were affected but they were more worried about getting cars than those things. And so I don't think that distorted our numbers very much. One of the things we asked ourselves, are we getting a boost from things like the money the government was passing out and the bonuses. But generally, the people I talk to and I'm glad to saying, I'm going to pay down debt. So in some ways, we saw people paying off their loans to a credit company earlier, some of that. And okay, and we also saw maybe -- and then they'd say, well, I'm saving the money because I think the government is going to come back and ask for it later anyway. So they had a cynical view of that. So it really didn't affect our day-to-day sales much at all.

Okay. Yes. But either way, it's been sort of an unusual like last couple of years. And then inflation obviously was kind of the story of this past year. But do you feel like 2023 could be a normal year? And I guess, if not this year, when do you think we kind of get there?

I -- that's a difficult and more nuanced question. I would say, if you're talking about auto repair, and you're talking about independent garages and technicians. The last 2 years have been normal. Yes. Maybe you have inflation and the accompanying pricing on top of that somewhat that would drive things up. But I don't detect any different behavior in those customers. I think sometimes when you sit where I sit anyway, you deal with people and with governments and other things, you get an aberrated view of what the people of work I think. In fact, I would say that I've never seen more diversion between the physical economy and the financial economy than now. So I think if you talk about the financial economy and thus, maybe bigger companies you had -- it was an unusual period like for C&I and so on. But for the auto repair business, which is 70% of our business, I don't think it's that much different. Yes, overlay of inflation, okay? You deal with that. But other than that, I don't think it was any different.

Okay. So main Street has been sort of in a fairly normal environment.

I think so. Well, main Street work. During the COVID, we never stopped working. None of our factories stopped. We were in the office every day because we couldn't not be in the office as the factories are working, how can we [ face ] the factory workers, right? And so I think depending on where you sit, that whole interlude had a very different view of the world, it didn't seem that much different to us. Yes, you had to wear masks and all these things. But in reality, the business itself was kind of about the same.

I wanted to sort of switch gears a little bit to sort of a bigger picture question about new product cycles and just because -- and obviously, this is not like new vehicle manufacturing, but product is core to what you do and it's your brand name. And so like how long do these product cycles typically go? Or how frequently do you do a major product refresh on a given line or a brand-new introduction?

It depends on the product. Software, we have a new software addition every 6 months. And probably, we restructured the software package every 2 to 3 years, things like that. If you're talking about something like hardware that's electronic or mechanical moving parts, like power tools and diagnostics, you probably bring out a new product in a different category, 2 to 3 years, every 2 to 3 years. And then tool storage, you might do the same kind of thing with a variation on top of it. And then hand tools, they tend to be longer, certainly longer wave, but then you got to overlay on top of this. The principal driver for our product development, which is the changing of the vehicles. So even though the hand tools, you could say, well, did you bring out a major new product maybe not, but we might have brought a new ratchet with a smaller head because some of the engine compartments have got so much smaller. And so it's basically the same product with aimed at a particular selective application in the auto repair business or in any other business. So generally, we're constantly turning over apart. We have 85,000 SKUs. So it's -- our array of products is a very different situation. It's got these -- got that overlay that I told you about, we generally try to -- in terms of our base models. But there's always these special models that are coming out to deal with particular difficulties in the car, like the F350 truck that needs the special wrench to take out the rear spark plugs or, for example, the new electric cars who -- for reasons I don't think anybody ever thought of are going to need all new lifts because you can't have a lift underneath the car because too often, you're going to have to drop the battery. And you can't fit the battery out if you're holding up the car with conventional lifts anymore. So that's something I don't think -- if somebody said, "Okay, we're going to have electric cars." Anybody would have thought of until you actually saw them try to do this in a garage and then you realize, wait a minute, I need to do all lift points. It seems like such a simple thing, right? And so that happens all the time in our business.

So that brings up an interesting question, too, because we hear this a lot just about how EVs are going to disrupt the entire auto aftermarket. But I mean, it seems like that could be a pretty big opportunity, right? When you see these changes happening...

Change is our friend. Actually, that's what drives most of our product is the changing in the vehicles. This is the whole thing. What's interesting about this is. I think I have this -- there's a couple of statistics I can tell you. The first thing is that 80% of the repairs on a vehicle right now are not on the powertrain. So 80% of those repairs have nothing to do with the drivetrain, which is the electric leap. So they're all going to continue, if not get more complicated. That's number one. If anybody thinks that a new -- a relatively new design of a car is going to be more trouble-free than an older design. Think again, right? I think so. So you have that kind of situation there. And then you also have our history. I wasn't in the business at this time, but let's say, the mid-90s, the number of electronic trouble codes on a car were measured in dozens. Now there are measures in tens of thousands, right? So cars become more drive by wire. But in reality, the demand for hand tools has only exploded. So how do you figure that. And the reason is, is because the compartmentalization of the cars, the remaining mechanical parts are even more complex and having a fit into smaller space and so on. So I'm pretty -- we are very, very confident that any change, whether you're talking about electric vehicles or plug-in hybrids, which would be both or, in fact, just regular hybrids or hydrogen or have a whole array of new products that mechanics are going to be needed to do, we needed to work on.

I guess that brings up another question, too, just about how you typically think about a tool having a replacement cycle, right? I mean, I've got tools in my garage and I like when one is like not working anymore, I get a new one. But then and I replace that existing one. But I would think that just given the diversity of the car park and that you still have these 25-year-old cars on the road and brand new cars on the road, like the mechanic has to have much broader...

That is the point. That is the point. It doesn't matter. I mean they're going to need -- the diversity of the car park creates much more need for more tools. I mean electric cars are going to need different tools, but the internal combustion engines aren't going away. If you think the -- I just talked to a guy outside from a company, he is from Southie in Boston. He's got -- they have no driveways. So how are they going to use electric cars, right? They're not going to -- he was talking about it. They're not going to be able to want to -- so those people are still going to use -- they may eventually convert but they're not going to convert quickly. And also you have this huge landscape throughout America that's going to keep creating this situation and those cars become more and more diverse. One of the things that's driven our business is every time an auto company comes out with a new car, there's a new design. That's the interesting -- and they having been in the auto industry, myself, when you design a car, you design it for appearance, nobody buys ugly cars, then you decide it for performance, then you design it for cost, then you design it for reliability, then you have to have emissions. Then you have to safety -- by the time you finish all the design parameters, you have no degrees of freedom left over for repairability. So every new car has a new challenge. This is what drives our business.

Great. So I guess one other thing that really differentiates Snap-on compared to other types of tool manufacturers, is this franchise component. So I want to talk about people for a bit and just how did that get started? And how are you recruiting new franchisees?

Everybody wants to be a Snap-on franchisee. We have bankers who are Snap-on franchisees. That's true, ex bankers. But generally, oh, gee, I think it's from the very beginning. One of the things that happened is when the company was found in the 1920, it was founded around innovation, There were 7.5 million vehicles on the road versus the 280 million vehicles on the road today. And this guy had an innovation, took 5 handles different dimensions, different configurations a Tee, [ lifts ], a crank, put them together 5 sockets of different dimensions and fashion them so they snapped on interchangeably. So this is a great deal, right? It revolutionized tool sets all over the country because it made the tools much more efficient. But what he told his salesman to do is a assure the distribution. And the distributors of the day. Normally, you sold tools through distributors -- go right into the garage. And the other thing he said is lay those tools out on green felt as if they were as precious as surgeons' knives, implying if the mechanic used those tools, he would be doing something special. We declare to the world that he is doing something special, perhaps as special as a surgeon. And that's the core of the franchise business. I think it was in full force by the '30s. So it's been around a long time. And how we recruit people. We've been up and down on this. We had some rough patches in the late '90s. But first and foremost, we want to find people of any background who like the mechanical. Believe it or not, there's a whole bunch of people who just like putting things together and that's how we ended up with bankers. They wanted to do something different. And they said, "gee, I love mechanical". So we do that. You want to be organized. And some people are ex mechanics, some people are ex school teachers. We get them from all lines of work. And generally, we have a pretty good pipeline of them. Now we may not be able to fill every place because when you have 3500, if you need one in South Peoria, you may not have a guy waiting or a gal waiting in South Peoria. But usually, you have generally across the country, we have people where you can put in place. Because everybody wants to be a Snap-on franchising because they look at it like they make their customers day. Now you may not believe that, but it's true. When they show up in a garage, it's like an event for the technician and the technician wants to talk to them. This is one of the reasons why I remember I said that the Snap-on brand is the outward sign of the pride dignity that working men and women take in their brands. Well, one of their brand has people wearing their jackets. What other brand has people putting the wrench in the hands of their newborn because they think it will influence the life for better or worse. What other brand has people putting their ashes in a toolbox.

That's on certainly something.

Somebody said to me -- one of the franchisees said to me, and this is, I think, why we're able to recruit the people. He said, I regularly fulfill people's dreams, they tell me, it was their dream to have this tool set, it was their dream to have -- wouldn't you like to be in a business where you made it possible for people to fulfill their dreams.

That's really interesting. I guess I'm curious then how many...

One thing I would say. Okay. It's the most powerful brand in America. We're working men and women, but it's power decays exponentially off the first floor of any building. So therefore, it is not so visible to white collar people. But if you walk in the county fairs of America, you will see this, you'll see our brand displayed.

Well, I definitely see the truck outside of my local dealership like every Monday.

There you go, right.

It's there. But I'm curious how many of your franchisees or how many Snap-on trucks are operated by sort of multi franchise owners versus kind of smaller in the past.

I know this number. It's, let's say, somewhere between, let's say, 13%, 10% and 15%. That varies from time to time. And it's a little bit north of 20% of vans are in those -- the biggest -- I think the biggest is 6. one guy has -- 1 or 2 guys have 6, but it's a rare person who can manage those, a little bit incompatible with the actual nature of being on the truck and having a pump that 24 hours a day, so it's not as common as you might think because the -- I think the basic requirements of the job are somewhat incompatibility with setting back and managing the situation.

Got it. Okay. I want to turn to costs for a minute. Just in an environment where a lot of companies are talking about margin pressure, especially from rising wages and benefits, does the franchise component protect Snap-on somewhat from that pressure and that it's borne by the franchisees?

No. I think the franchisees, oh, you mean in terms of wage pressure?

Right.

Well, okay, they're their own boss. And I assume that if you get wage pressure because the price of beef goes up, the franchisees are going to want to make more profit. And so therefore, they're going to want to charge more. I don't think part of it is, yes, the franchisee may feel the same margin pressure and that isn't an employee for us. But generally, we haven't felt that pressure. Our margins have been up pretty well. It was 21.5% in the quarter. That was the second highest ever in our time, up 50 basis points over last year and up 360 basis points over pre-pandemic levels. And so I think that's been pretty strong. And our year's numbers were 20.9%, up 90 basis points over last year. So I think in this base, we've been able to do this. We see some pressures in terms of steel and so on. Steel is going up and then down. So that back to where it was the pre-pandemic levels, but we've been able to price for that. And part of that is, if you think about the franchisees have a couple of things. One is, they can -- and through them, we control the customer interface. So therefore, we can decide what the product is going to be sold or we can't exactly decide, but we can have an influence about what the product can be sold for and -- or will be sold for. And we have -- he's got 4,000 SKUs on his van. He's got a catalog of 40,000. He's got promotions that can be attracted lean or rich depending on how we have it. So the pricing interface for the franchisees is fairly cloudy in the face of. Plus, he's got all these new products coming out all the time. So therefore, he's been able to -- during this interlude,I think raised his numbers. And so the franchisees have never been more -- we believe the franchisees have never been more flush in terms of their position. There's certainly sales are going up. We believe their equity is going up, and they seem to say so.

Great. Are there areas of the business where you're having difficulty finding the right staffing levels, just given that there have been high turnover rates in pretty much every sector of the economy.

Not really. I mean, the thing -- part of this is it doesn't mean that we don't have places where we'd like to hire more people. But I don't see it more acutely than it might have been 5 years ago. And we have all these things. Part of it is we actually didn't lay off anybody in the -- and so I think part of the people who have trouble finding people is they got disenfranchised. So I mean, I think that's one of the things. And that tends to spread in a community that you're not laying off. And so therefore, people are kind of anxious to go work for you. And so that's worked okay for us. I'm not saying it is -- there are places in distribution centers and so on, where the turnover has always been higher, and it's a little higher today. But we generally don't see that as a limiting factor for us.

Got it. Okay. Well, I want to make sure I give the audience time to get their questions in. It's one over here.

Very briefly. Can you address the financing size of your business? Haven't really talked much about that. Where do you see that in the current environment, given rates and given just affordability issues overall?

Well, first of all, we finance that long. So it doesn't affect our actual cost of funds. And generally, our rates that we charge from jurisdiction to jurisdiction often are statutorily the highest because reflecting the sub-prime nature of our business. So we don't see the rates rise as having much impact except that maybe you could argue that we don't look as expensive compared to what it might be in prior times. But I already said that generally, if people buy our products, they finance with us, so there was an alternative sources competing with us. The credit company doesn't do anything but serve our business. We don't go outside. We don't finance other people's products or anything like that or general products. So I would say that the credit company is probably in for a bit of a rise because we see in the last quarter, the bigger ticket items have come back in our business and the originations in the credit company was up 19%. Generally, it's also been relatively insulated against rises in losses during difficult times. I mean it does move up some time. In the Great Recession, ballpark numbers of the -- they may have risen, let's say, from [ 2.5 to 3, 3.5 to 4 ] in terms of all-in losses but generally, 100 basis points on that kind of thing wasn't much for us. and we tend to lose more on currency sometimes then that made a difference. So I think our credit company is fairly solid. And I think it's on a local rise right now.

You talked about EVs and kind of the moved EVs with fewer parts in an EV car, doesn't that mean that there are going to be fewer tools? Or how does that really translate. And I guess a company like Tesla, are you having as many tools that are needed to service a car like that?

Well, we -- Tesla is one of our customers. And so -- and we call on the Tesla garages, remember that in the United States, generally the technicians, all on their own tools. So in some ways, when I'm talking about [indiscernible] on Tesla garage, we'd be selling them bigger stuff like lifts and so on, solar technicians tools. I actually -- we're not seeing that in the warranty rates and so on in the electric cars that are on the road today. So I don't think that's going to lead to that. And on top of it, it will lead to a whole set of other tools that if nothing else, you don't want to be poking around an electric car with an noninsulating tool, otherwise, you'll fry yourself. So that's going to require a whole bunch of different tool sets. If you're going to work on those. Right now, there are enough electric cars to drive much business for us, except around facilitation of the vehicles because if you do the math, like 250,000 garages in the United States, how many do they see in a year? You see -- so we're just on the verge of starting to see the drive associated with that. And then on top of it, you're going to see all these other cars, like plug-in hybrids and internal combustion engines. So I don't think we're seeing that right now much of a difference, but the data is still early. There aren't that many on the road.

You mentioned one thing just about FX and how at times you can lose more on FX than you do on loss rates. I'm just curious if there's -- what your global operations look like compared to what we see in the U.S. and if there are material differences and how we should think about expansion opportunities globally.

Well, the van business, 40% of the business, only works where it is established where technicians own their own tools. And that's the United States, Canada, U.K., Australia, South Africa. Anywhere the Brits were for some reason. I think it has to do with the Brits -- the British apprentice system. But the rest of the businesses are sold direct or through distributors to the -- in auto repair to the facilities themselves. And then the C&I business is, again, a direct and distributor business. Generally, so what you'll see in most jurisdictions of Europe, except the U.K., you'll see RS&I and C&I selling into all these critical sectors. RS&I will sell through distributors. And RS&I has a pretty big presence in Europe based on the acquisition profile of it all, particularly around one of the things that's become a big driver all over the world is automated driver assist systems. So one of the things about this is, this is driving a significant component of our business. You talked about electric cars and you talked about repair in the cars. But one of the things we know now is we're seeing is the cars all becoming a neural network of sensors. If you -- and any time you have a small perturbation of the car, you need to recalibrate these sensors. And for reasons that I am not surprised that based on having worked in the auto companies, but generally, everybody has their own system. And so we have the decoder ring for this, and we help independent garages or dealerships decode and recalibrate the systems. If you doubt this bump your bumper sometime or damage your bumper and take it in and see how much it cost you to get it repaired because it won't be cheap or you got a crack in your windshield, you'll find out what I mean. And so there's a lot of that being driven, and that's in the United States and outside the United States in a lot of different situations.

That verifies something driven brands said right before this session was the same thing, like just all the increased complexity in parts of the vehicle that you wouldn't think of outside of the drivetrain and like [indiscernible] bumper area.

Well, actually, like I said today, small number of parts or not, only 80% of the -- 80% of repairs aren't on the drivetrain. They're all stuff like, okay, at a BMW, if I change the battery, you got to reprogram the alternator. We do that for you. And by the way, if you remember that, most of these cars are being serviced in independent garages, they're not being serviced in dealerships. And they can't be serviced in dealerships because there are 17,000 rooftops in America. There are 250,000 independent repair shops. So it's a physical impossibility for them to be serviced in those places. If you live in Seneca Falls and New York, you're not going to own a Toyota because the next Toyota dealership is too far away.

Great. I think that brings us to time. So thank you so much.

Thank you.

Appreciate it.

All right.