Stanley Black & Decker, Inc. (SWK) Earnings Call Transcript & Summary

Hi, everybody. Thanks for being here. We'll have to do a little bit of a manual follow along for the presentation. But I hope it's going to work out just fine. So Mika, can you move to the intros, first slide, the intros. There you go. Hi, everybody. I am Nico Avila, I'm CTO for North America with Globant.

Good afternoon, everyone. Okay. There you go. [Technical Difficulty]. Okay. Good afternoon. Welcome. I hope you guys are having a good time. I'm Shobhit Gupta, Vice President of Engineering for Stanley Black & Decker.

So maybe going to the next slide for anybody that doesn't know Globant. Globant is a technology services company. We focus mostly on innovation. We focus on companies that are trying to change the way that they operate, the way that they engage with our consumers and their employees through technology. We're about 30,000 folks around the world. And we have a very strong focus in the North America market. We are very known for our work at Disney but we also have a lot of other verticals. We work with airlines. We work with retail. We work with banks. We have a big presence in life sciences and games as well. So very diversified. Everywhere where technology is trying to push the envelope, we're there. And if anybody doesn't know about Stanley Black & Decker, I think that we're...

I'm probably going to say Stanley Black & Decker is your household brand. We are for those who make this word. You have heard of black and yellow Craftsman, Linux, think about it. We are right there in your house somewhere. So you're going to see a quick video to talk about who we are. But if I were to summarize it in one line, we are for those who make this word. Anybody who constructs anything, those anything has aspiration to do anything, we are right behind as there is fine to deliver that.

Now we'll see if it plays, live television.

You got -- I'm pretty sure some engineers out there, they can appreciate the engineers. [Presentation]

And I cannot thank Stanley Black & Decker enough for all of the cool things that I got in my garage that made me really happy over the weekends, right?

It keeps going on.

Okay. We're back. All right. So we wanted to talk about the innovation and we're going to share some interesting things in the future. But we thought of starting on the things that we've done. So thinking about tools, when you think about connectivity, when you think about tools, innovation as [Technical Difficulty].

I hope this is better. Can you guys hear me now? Okay. Awesome. Thank you. I appreciate the patience from everybody. So when you think about your household tools, not many people think that innovation from the physical world to the virtual world is just by the mechanics or the efficiency or the lack like or the motors of it. But a lot has been going on behind the scenes that probably will not get noticed at first chance to a lot of our consumers. And when we talk about those, our focus as a Stanley Black & Decker is on specifically 3 things. That whomsoever uses our tool, they are more safer, they are more productive and they're secure in the environment. And when you think about those challenges, when you think about those applications, asset tracking, asset management, asking a very simple question, where is my drill, where is my device. It's a very simple question, which requires a lot of energy on a job site, which is 5 acres or probably 7 stories and having worked on 20 different places in this story. Where is my battery? Where did I leave it yesterday when I checked out? Those are very simple questions, which many times our users lose a lot of time in finding it. So making sure that our innovation is making a more productive out of their lives. Fleet management, our channel partners. When you're thinking about NRF, think about Home Depot, Lowe's, any channel partner, is hardware and all of those, how do they manage more effectively, more efficiently the things that they have. They sell our tools. They are our face or everything that we do. How do they manage their inventory much better for the things that they sell? We have been pushing that envelope forward using the data and AI, leveraging it, making other things much better, secure and more innovative. This is -- you're going to give me some memories. So -- and I think any of these cases would have been great to share. I think there is so many conflicting objectives that need to be filled by technology and retailers have been dealing with supply chain issues with commerce replatforming, a lot of data and analytics to help them figure out. And I think these cases were really sound. But because this was a big idea session, we thought, why don't we actually think of what's coming next? Why don't we think of what's the next thing that's going to be relevant for experience, right? And we thought this was an interesting time to be talking about AR and VR. So why? I think we're just weeks away from the release of the Apple Vision Pro. And we're coming out and that's going to be something that people talk a lot about. We are coming off the shoulders of CES, where we saw a lot of releases on VR, AR and a lot of new devices. But it's not only this year. Actually, last year had a new Quest 3 that was released. If anybody hasn't used it, I truly recommend working out with the Quest. It's all of my word maps in the morning are with the quest. And it's not only on the VR devices. There are more devices that are coming through. These little guys, the Meta, Avon goggles were released last year. And they were actually selling so well that it took me like 2 months to get a good pair of them. So finally, I have them. It's to the point is that there is so much innovation going through on devices that I think it's going to be shifting where we can go. And as you think about this transition, which is happening, we want to take you and bring you back probably 15 years, when we used to navigate through manuals, physical printed manuals or finding SKUs that we all wanted to find in Home Depot, Lowes or even in your any store. And the transition from those devices have been to digital devices with this computer. We then came another evolution that you move from computer devices to mobile devices. The next evolution for the devices is coming from the audio and mixed reality, where you are not just sticking to the transition of information but also the transition of the reality. And what does that mean? If you can go to the next. That means however customers engage with us is evolving. The last time when the users had the difference of change from physical to digital, their experience and expectations of what values can be delivered changed. It evolved. Their expectations of how the search for a SKU was not going alphabetically. They started searching into a search bar, which we all know led to different searching algorithms and the whole Google that we know today. So the finding as the devices evolve, they naturally drive the experience of our end consumers into different direction in the realm.

And the opportunity to change the experience is real. Actually, I think there is a contrarian case of what's going on. For the last 15 years, we've been going on and on with our phones around. And I think that, as Shobhit said, the first experiences that we had with the phone were somewhat limited, probably the first year, the whiplash was probably one of the most downloaded app from the App Store. But you wouldn't expect to have the experiences that you can see today from curbside pickup to really not only interacting with news by following a link or actually exploring content from [indiscernible], but actually changing the form factor and the length of the content that we're sharing. So that's a point to say that the way that the mobile phone changed the experience, we can expect it to happen. Actually, when you think about it, we first started to be having these watches to have our heartbeat and to know our hours of sleep and our rings can do that. These little guys can connect to the Internet. They're actually your phone. You can make calls with them. You can hear music on Spotify. They will connect to your Bluetooth devices. So you can very much work without a phone. And yes, probably I'm not going to be taking photos like that. It's somewhat a gimmick. But I can go around and say, "Hey, Meta, take a photo. And just like that, my glasses took a photo of the audience. I'm not going to be sharing that much of that. But at the same time, I think it's changing the way that these devices are allowing us through interact with technology. And it's changing on the -- of the many things that happened with AI last year. Because now this assistance can really change the way that we interact. So I think that was a case of how the many devices are changing the way that we interact with technology but we wanted to get back on VR. And before where we think that we can share what can be useful, we wanted to talk about things that have already happened.

And these are not hypothetical use cases or something, which is cool to hang around. We have really tried to bring this virtual reality into the value for our end customer. And one example is our prefabrication platform from Stanley Black & Decker. As for those of you are quickly telling, if you look up in the ceiling, you see a lot of hanging different pipes, different steel pipes and different kind of things. A lot of those were not built in here. They were built in a shop, they were brought in here and installed. And there were specific trades, which are responsible for calculating those engineering, what kind of studs, what kind of anchors, what kind of hangers to go in there. That is one of our primary audience as a Stanley Black & Decker, we help them prefabricate. The point being, think about this building, both in real time, 30 different trades, the plumbing, the electrical, the mechanical, the fire stop. Everybody trying to work together at the same time and running into each other. That information is presented today in 2D format. You build a 3D model from your architect. You printed out on sheets and then you look at top view, section view, side view and all kind of use. Even on digital devices, you just keep looking at those 2D PowerPoints to see the progress, the critical points, the challenges, which requires a lot of contact setting. One, our prefabrication platform does is bring all that data together, brings all those stakeholders together to resolve those issues without setting those contexts. What better way of representing that information into a 3D model. Think about this whole architecture building as being built upon, the areas where there are conflicts coming in red, the areas which are running on schedule in green and the areas, which do not have clarity in yellow. And you can zoom in, figure out the challenges, talk to the people without again setting any context or you're working in zone A, plumbing, who is the sub. No lingual required. Think about the new people or the new information being passed on with the flow less in the real time to all the parties together, bringing the transparency, bringing the profitability, bringing the safety and security for everyone. And I really love the concept of making things simple, especially in those projects. If it's hard for me on the weekends to figure out how to make one of my projects, I can't really figure out one of those peak projects. And it's really a good concept of games, right? We've been working, building AAA games for many of the main studios for many years. And I remember a talk in the game development conference. I think it was 2016 or NASA came in and they give a talk call, we are the spacing raiders. I don't want to spoil it for you but they're actually saying we spend $36 million training each pilot just to fly a plane and ever keeps learning how to pilot a whole space fleet a week in the basement. So there is so much that you can learn about using gamified experiences to have people engage with learning in a different way. And we've been doing a lot. And I think just one case where we've used game like technology in different industries plus when COVID hit, we -- Nissan was launching the Ariya, the car. And there was no way to get everybody in a room to show the car. So we create a virtual showroom together with them to -- for them to be able to share that in the launch. That's just one case that I think it's interesting for retail. It's appealing and it's actually similar to something that we've seen because everybody has been able to -- if a shelf is going to fit in their living room or what else. So this is very natural. There are cases like that are important, but there are also very interesting cases that can be expanded from that. So we thought of going out a bit further. And we don't want you to get caught up into any of these specific examples. As we will zoom out a little bit, are there themes that at Stanley Black & Decker, we have identified for the use cases for specifically productivity or impacting our end customer? And these are the 3 teams, which are coming out, which came out really, really early to us training for our users and consumers to use our tools more attractively so that they are safe. If you're thinking about, I'll give you an example of angle grinder. If you -- it's a very simple tool. A lot many people would say, but the pros who use it know exactly what you're talking about and we're going to see some applications to it. Changing of disc or a blade on an angle grinder could be an art in itself. And the direct safety of that tool depends on how it is operated. And while Stanley Black & Decker and we hold ourselves as devolve in the highest esteem and knowing guarantee tough and trying to as much information and education to our users. Many times, we all know that information remains printed into physical format of manuals. The whole world has moved on to digital, while our most critical important pieces of training, safety and others remain in physical. And how do we transition that journey to next level to make things more secure, which is again going to drive that trainee directly associated through data and AI association, personalized versions of safety and security. How do you use certain tools on the job site? How do you make it more effective? And if you use a tool properly, your repairs and breakdown of those tools remain very, very less. So it's a circle, which starts from productivity and brings you safety back to profitability. And we have seen this very common link of these applications coming soon.