Snap-on Incorporated (NYSE:SNA) Q2 2022 Earnings Conference Call July 21, 2022 10:00 AM ET
Company Participants
Sara Verbsky – Vice President, Investor Relations
Nick Pinchuk – Chief Executive Officer
Aldo Pagliari – Chief Financial Officer
Conference Call Participants
Scott Stember – MKM Partners
Luke Junk – Baird
Bret Jordan – Jefferies
Christopher Glynn – Oppenheimer
Gary Prestopino – Barrington Research
Ivan Feinseth – Tigress Financial Partners
Operator
Good day. And welcome to the Snap-on Incorporated 2022 Second Quarter Results Conference Call. Today’s conference is being recorded.
At this time, I would like to turn the conference over to Sara Verbsky, Vice President, Investor Relations. Please go ahead, ma’am.
Sara Verbsky
Thank you, Mary, and good morning, everyone. Thank you for joining us today to review Snap-on second quarter results, which are detailed in our press release issued earlier this morning. We have on the call today 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 will take your questions.
As usual, we have provided slides to supplement our discussion. These slides to be accessed under the Downloads tab in the webcast viewer, as well as on our website snapon.com under the Investor section. These slides will be archived on our website along with the transcript of today’s call.
Any statements made during this call relative to management’s expectations, estimates or beliefs or that otherwise discussed 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. Any 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?
Nick Pinchuk
Thanks, Sara. Good morning, everybody. As usual, I will start the call by covering the highlights of our second quarter. Along the way, I will give you my perspective on our results, once again they are encouraging. And our market, the robust, resilient and promising and I will talk about our progress.
We believe we are now stronger than ever and we will also speak about what it all means and we believe it means that we are better positioned for more, a lot more. Then Aldo will go into a more detailed review of the financials.
All you have to do is follow the news and you know that we live today in the midst of turmoil, inflation, variants supply, continuing unpredictable outbreak, precipitous lockdowns and a war in the Ukraine and Snap-on has shown through it all, wielding our advantages in product and brand, and in people, progressing down our runways for growth, engaging our Snap-on value creation, driving improvement, making the most of our resilient markets and extending our positive trajectory, piercing the turbulence. The story of our second quarter is simply one of rising momentum.
We have been meeting the challenges quarter after quarter and we are simply getting even better at overcoming the difficulties, and going forward, we are confident of our capabilities continue to advance and here are the numbers that say we should be confident.
Our reported sales in the quarter were $1 billion, $136.6 million, up versus last year by $55.2 million or 5.1%, including $32.4 million or 330 basis points of unfavorable foreign exchange. Organic sales growth was 8.4% with gains in every Group.
And compared to the pre-pandemic levels of 2019, our upward drive is clear as a bell versus 2019 Sales in the quarter rose 19.5% as reported and 18.7% organically. This is now eight straight quarters of being above pre-pandemic levels.
We believe we are continuing an ongoing trend of accelerating expansion and are building momentum with emphasis, increasing higher and higher, demonstrating that we are only getting stronger every day.
The Opco operating income of $246.6 million, was up $29.5 million and the operating margin, it was 21.7%, up 160 basis points from last year and 170 basis points from 2019. For financial services operating income of $65.3 million, compared to the $68.9 million of last year and that result combined with Opco for a consolidated operating margin of 25.5%, up 100 basis points from last year and 130 from 2019.
And EPS was $4.27, up 13.6% from last year and 32.6% above the comparable pre-pandemic level recorded in 2019, up $3.22. I have been saying this since the third quarter of 2020, I will say it again, we believe is Snap-on the stronger now than when we entered this great withering and the second quarter numbers say it so.
Now let’s talk about the markets. Auto repair remains positive. Most if, not all — most, if not all of our key indicators are quite favorable spending on vehicle maintenance and spending on vehicle maintenance and repair, up, number of techs, up, mechanic wages, up.
The techs are optimistic about their prospects and about the greater need for the skills as new technologies, new complexities advanced across the car park and we saw a confirmation of in that broadly held believe, for several quarters now is a number of automotive repair technicians continue expanding upward period-after-period, higher now than any of the last three decades.
And when I speak with shop owners or managers, as I often do, it’s clear that there is a need for more, many more and that Snap-on we love it. Vehicle repair is a strong and resilient market, a feeling that’s also reinforced by our franchisees. You can see it in our numbers. You can hear it in their voices. We believe they are more prosperous than ever.
Besides franchisees and technicians, there’s vehicle repair shop owners and managers, this is RS&I arena. Demand for new and used cars is high, but supplies are limited, it’s a well known Story. The pandemic has impacted the auto supply chain, sure. But it doesn’t matter.
Lots of new cars or scarcity of new vehicles, the car park is large, ageing, getting more complex and demand for repair remains strong, come back to high water and the shops are seeing this clearly and starting to invest to meet the currently need and get ready for the future.
The variety of drivetrains is expanding, internal combustion, hybrid, plug-in electric, full electric and every day there’s more driver assistance and more vehicle automation, increasing vehicle complexity.
Shops now have a greater need for new and upgraded equipment and they are becoming more and more rely on service and repair information to guide them through the galaxy of new requirements and procedures, it’s all music to our ears actually.
Snap-on makes great tools and equipment and it’s clearly repair and information headquarters. RS&I has taken advantage of that trend, creating new equipment offered and advanced database solutions. We now have a strong array of products in that vital areas.
Mitchell 1 repair information software and shop management software, SPX, electronic parts catalog, our dealer shop management technologies, electric vehicle health check solutions and our heavy-duty and fast track intelligent diagnostics hardware.
These are big databases and getting more powerful and easier to use, helping the shop to fix it right the first time and efficiently. The repair shop is changing, rising in complexity and ours — and I has the products to match it.
Finally, let’s talk about critical industries. At Snap-on, we say Snap-on rolls out of the garage solving tasks of consequence and we do. This is C&I territory, our most international operation and it’s where we see the most continuing impact of the pandemic and it’s in children like supply chain inflation and supply chain disruption and inflation, where customers have been slower to accommodate, where headwinds are still persisting and where our multi-SKU product offerings are particularly impacted by supply chain challenges.
I suppose everybody knows about the two-month lockdown in Shanghai, that area is a significant C&I business center and it’s also key transportation hub for our China factory, so the lockdown was an obstacle.
And beyond that focused event, C&I is particularly challenged by its considerable geographic reach, adjusting with the varying impacts and protocols and economic turbulence from countries with a varying virus impacts and protocols and the economic turbulence from country-to-country. But I would say, if you look at the quarter, the C&I team rose to the occasion, and in the quarter, we won gains in North America, in Europe and in Asia, despite the difficulties.
So I’d describe our C&I markets as representing continuing opportunity and coupled with automotive repair, we believe our overall markets are robust right now and there is considerably more opportunity ahead as we move along our runways for growth.
And I can leave this section about robust progress in abundant possibilities without once again speaking of our — of the engine of our advanced Snap-on value creation, particularly in customer connection and innovation, developing new products and solution born of the observation gathered right in the workplace, insights that create great new offerings, and at the same time, help guide the expansion of our franchisee selling capacity with better processes, more effective training and more powerful communication, all of that helped drive our progress, overcoming the difficulties, accommodating the virus, taking full advantage of the market opportunities, starting a continuing positive trend moving forward and we are going to keep it going.
Well, that’s the overview now, let’s move to the segments. In the C&I Group, sales in the quarter were up 2.5% as reported or 8.6 million versus 2021 and that includes $25.3 million or 6 point — 7 point, that includes a $25.3 million or 7.6% organic gain driven by progress across all our divisions.
From an earnings perspective, C&I income was 51.7%, a decrease of $3.8 million compared to 2021, $2 million of that was unfavorable foreign currency and the rest represents the impact of supply chain turbulence on the multi-SKU C&I products.
The OI margin was 14.4%, down 140 basis points from 2021, but did represent progress and then it’s a 100 basis — 100 point sequential improvement from the last quarter, when compared with the pre-pandemic 2019 periods, sales were up 7.4% organically and the OI margin of 14.4% was down 20 basis points, but that included an 80-point impact from acquisitions and unfavorable currency.
Now continuing bright spot in C&I this quarter and again this quarter was SNA Europe, it did deliver yet another quarter growth, expanding double-digit year-over-year and well beyond pre-pandemic levels, all against the wins in Europe with innovative solutions of our Bahco Erle tool management system leading the way, tailoring product specific to customer needs.
Europe is a varied market and SNA Europe is making increasing gains by matching the products to the specific tasks. And that positive SNA Europe was joined in C&I, quite valuable contribution from recovering areas in critical industries like aerospace, in general industry and from countries, in Asia-Pacific, like, India, Japan and South Korea. All combines overcome the decline and slower to recover sectors like the military and natural resources. We do remain confident and committed to extending in critical industries and that commitment is confirmed with great new products.
Speaking of product, last quarter to help solve crucial tasks across both critical industries and automotive repair, we strengthened our 14.4 Volt MicroLithium power tool lineup with the new Snap-on CT761 3/8-inch Impact Wrench. It’s a very attractive, but it’s also quite functional. Featuring a compact design to reach tight spaces, a nylon-based housing for rugged durability and a special toggle switch trigger for precise control.
The new unit also includes a try being headlight for broad illumination entire work area and now that’s a feature that makes complex multi-point jobs much easier in the low-light conditions that often occur in the workshop or enrolled repair. You can imagine it.
The Impact Wrench also delivers a robust 225 foot pounds of breakaway torque and it’s controlled by a variable speed drive. So the operator can apply just the right torque for each job and the 14 volt battery with its 2.5 amp hours ensure it’s consistent output and an extended run time which makes for a lot more efficient workday.
The CT361 began shipping early in the quarter and it was right on target, quickly becoming a million hit product and it’s sold out and what seem like a blink of an eye. Great product. Well, that’s C&I, a promising quarter, volume up nicely, starting to overcome the turbulence, moving down it’s runways for growth.
Now for the Tools Group, sales of $520.6 million, up $36.5 million, including $7.7 million of unfavorable currency and a 9.3% organic gains and the operating margin 23.9%, up 250 basis points compared with pre-virus 2019 sales grew $114.8 million, including a 28% — 28.1% organic gain and this quarter is 23.9% operating margin was up 630 basis points compared with those pre-virus numbers, coming out of the pandemic stronger indeed.
Another positive quarter for the Tools Group with growth across all product lines and beyond as we see further indications of continuing strength. Other data like the franchisee health metrics, which we monitor every quarter, they remain quite favorable and on a clearly positive trend.
We do believe our van network remains quite strong and it’s not just the numbers. Just a few weeks ago, I spent time with a couple of dozen franchisees representing the regions on our U.S. and Canadian national franchisee advisory councils, and they were motivated and prosperous, enthusiastic about the current performance, positive about the trajectories of the other vans and various areas that they represent and very optimistic about the prospects for even more going forward. They believe in their opportunities and they are confident about their future. The Tools Group, strong quantitatively and qualitatively and that positivity was not just internal.
Once again this quarter, it was reinforced by the external view. Snap-on was recognized again this year among the top 50 in the franchise industry by Entrepreneur Magazine. And once again in that ranking, we rated in the top of the Tools Distribution category, a place we have for some time and this type of recognition reflects fundamental, contemporary strength of our franchisees and of our overall mobile van network. It is a powerhouse business and that momentum would not have been achieved without a continuous stream of unique new products.
And one of those that helped drive our hand tools up again this quarter, again this quarter was our new Long Nose Slip Joint Pliers. It’s a special tool with our patented 3-Position joint precisely machine for effortless switch — for effortless switching and control, allowing the pliers to — it allows the pliers to keep the jaws parallel increasing the contact with the work piece, with its indicated — it’s got a relocated joint, optimized handle shape and unique Talon Grip-serrated jaws.
With all of that our new pliers provide over 50% more pulling power. The machined and hardened teeth are sharp and strong and present three different gripping geometries, from heavy serrations at the base to fine grooves at the tip, great variability for multiple applications. You can apply different parts of the jaw. They are manufactured right here in our Milwaukee factory and they are manufactured from special cold forged allied steel for greater durability and strength. These players were launched at the beginning of the past quarter and they have been very well received.
When I talk to the franchisees of the NFAC, they said are flying off the truck, and they are right. The sales have already made a hit product strategy just in one quarter. Our new offerings are in fact making a difference in the Tools Group, you can’t miss it in the numbers, eight straight quarters above pre-pandemic levels. The Tools Group is moving onward and upward with eye-catching momentum and if you look at the numbers or spend any time with the team, you believe it’s all systems go and it is.
Now on to RS&I, sales were up 4.6% or $18.2 million versus last year, including $27.4 million or 7% organic uplift with double-digit growth in undercar equipment with diagnostics and information advancing and with the dealership activity flat from an earnings perspective RS&I operating income of $95.7 million, represents a rise of $9 million or 10.4% and the operating margin was 23%, up 120 basis points in the last year.
Compared with 2019, sales were up 19.5% as reported and the organic growth was $58 million or 16.8% with strong advances in undercar equipment and diagnostics and information products. For profitability, the OI margin of 23% was down 240 basis points versus 2019, pretty much reflecting 110 point impact just from acquisitions and the effect of the margin dilutions from the higher sales of undercar equipment that we have been seeing.
We believe RS&I has great opportunities and we are fortifying its way forward with new products like our Hofmann 609 aligner, specifically designed for independent or general repair shops, where alignment is — it’s not currently a primary focus and the space is short.
The new offering allows those all-purpose garage to keep the low volume alignment business in-house with its compact footprint and portability kit enabling easy storage when not in use and efficient deployment when alignment is actually need. It saves a lot of space, but it gets the job done.
With our latest 3D system authoring OEM approved accuracy, the 609 enables the handling of even the most complex alignment systems by those general repair shops. It generates a high return on the investment, doesn’t occupy space needed for other repairs — often needed for other repairs and it fortifies the garage’s reputation for technical capability. It’s a great value for the general repair shops and they are noticing.
Our equipment business has been on a roll with strong double-digit equipment growth for double-digit quarters for some time and the Hofmann 609 aligner is a big player in that mix. RS&I, approving its position with repair shop owners and managers, growth in undercar equipment and diagnostics and information projects, products and an array of innovative new products and product lines to lead the way.
Well, those are the highlights of our quarter, Tools Group, strong progress everywhere, unmistakable strength. C&I, recording a positive performance against the variation across industries and geographies and RS&I, expanding profitable volume with repair shop owners and managers.
Snap-on overall sales rising markedly, both versus last year up 8.4% organically and up 18.7% organically compared with pre-pandemic levels continuing clear positive trajectory. Opco operating margin are strong 21.7%, rising again in this quarter rising again this quarter, up 160 basis points. EPS $4.27, up versus last year, up versus last quarter and up versus pre-pandemic levels. It was an encouraging quarter.
Now I will turn the call over to Aldo. Aldo?
Aldo Pagliari
Nick, thanks. Our consolidated operating results are summarized on slide six. Net sales of $1,136.6 million in the quarter increased 5.1% from 2021 levels, reflecting an 8.4% organic sales gain, partially offset by $32.4 million of unfavorable foreign currency translation.
The organic sales gain this quarter reflects high single-digit growth in each of the company’s segments and compares to an 8% year-over-year organic increase recorded last quarter. Consolidated gross margin of 48.7%, remained the same as last quarter, but declined 150 basis points from 50.2% last year.
Higher material and other costs were partially offset by contributions from the increased sales volumes and pricing actions, as well as from benefits from the company’s RCI initiatives and 30 basis points of favorable foreign currency effects. Again this quarter, we believe the corporation through pricing and RCI actions continue to navigate effectively the costs and other supply chain dynamics of the current environment.
Operating expenses as a percentage of net sales of 27% improved 310 basis points from 30.1% last year. The improvement is primarily due to higher sales volumes, savings from RCI initiatives and lower cost associated with stock-based expenses, operating earnings from financial services of $246.6 million in the quarter, compared to $217.1 million in 2021. As a percentage of net sales, operating margin before financial services of 21.7%, improved 160 basis points from last year and was up 140 basis points sequentially.
Financial services revenue of $86.4 million in the second quarter of 2022, compared to $86.9 million last year. Operating earnings of $65.3 million, a decrease $3.6 million from 2021 levels, primarily as a result of higher provisions for credit losses and those recorded last year.
Consolidated operating earnings of $311.9 million, compared to $286 million last year. As a percentage of revenues, the operating earnings margin of 25.5%, improved 100 basis points from 24.5% in 2021.
Our second quarter effective income tax rate of 23.8%, compared to 23.3% last year. Net earnings of $231.5 million or $4.27 per diluted share increased $23.5 million or $0.51 per share from last year’s levels, representing a 13.6% increase in diluted earnings per share.
Now, let’s turn to our segment results, starting with the C&I Group on slide seven. Sales of $359.1 million increased from $350.5 million last year, reflecting a $25.3 million or 7.6% organic sales gain, partially offset by $16.7 million of unfavorable foreign currency translations.
The organic growth primarily reflects double-digit gains in the segments European based hand tools business and Asia-Pacific operations, as well as a mid single-digit increase in sales to customers in critical industries. Within critical industries, solid gains in general industry and international aviation more than offset lower sales to the military.
Gross margin of 37.3%, although improving sequentially, declined 220 basis points from 39.5% in the second quarter of 2021. This is primarily due to higher material and other input costs being partially offset by the benefits from higher sales volumes and pricing actions and savings from the segment’s RCI initiatives.
Operating expenses as a percentage of sales of 22.9% in the quarter, improved 80 basis points from 23.7% in 2021, primarily due to the effects of higher sales volumes. Operating earnings for the C&I segment of $51.7 million, compared to $55.5 million last year. The operating margin of 14.4%, compared to 15.8% a year ago.
Turning now to slide eight, sales in the Snap-on Tools Group of $520.6 million, increased 7.5% from $484.1 million in 2021, reflecting a 9.3% organic sales gain, partially offset by $7.7 million of unfavorable foreign currency translations.
The organic sales growth reflects a double-digit gain in our U.S. business and a low single-digit increase in our international operations. In the U.S., sales were up across all product lines and include a particularly robust sales of full-storage in the quarter.
Gross margin of 46% in the quarter, compared to 45.5% in the first quarter of this year, but declined 80 basis points from 46.8% last year. The year-over-year decline is primarily due to higher material and other costs, and 10 basis points of unfavorable foreign currency effects, partially offset by benefits from higher sales volumes and pricing actions.
Operating expenses as a percentage of sales 22.1%, improved 330 basis points from 25.4% last year, reflecting the benefits from higher sales volumes and savings from RCI initiatives, and including the effects of lower expenses associated with the company’s franchisees stock purchase program. Operating earnings for the Snap-on Tools Group of $124.4 million, compared to $103.5 million last year. The operating margin of 23.9% improved 250 basis points from 21.4% a year ago.
Turning to RS&I Group, shown on slide nine, sales of $416.8 million, compared to $398.6 million a year ago, reflecting a 7% organic sales gain, partially offset by $9.2 million of unfavorable foreign currency translation. The organic gain is comprised of a double-digit increase in sales of undercar equipment and a low single-digit gain in the sale of diagnostics and repair information products to independent shop owners and managers. Activity with OEM dealerships was essentially flat.
Gross margin of 43.2%, declined 150 basis points from 44.7% last year. This is primarily due to higher material and other input costs and increased sales in lower gross margin businesses. These declines were partially offset by benefits from pricing actions and savings from RCI initiatives, as well as from 50 basis points of favorable foreign currency effects.
Operating expenses as a percentage of sales of 20.2%, improved 270 basis points from 22.9% last year, primarily due to benefits from sales volume leverage, including higher activity and lower expense businesses and savings from RCI initiatives. Operating earnings from the RS&I Group of $95.7 million, compared to $86.7 million last year. The operating margin 23%, improved 120 basis points from 21.8% reported a year ago.
Now turning to slide 10, revenue from financial services of $86.4 million, including $800,000 of unfavorable currency translation, compared to $86.9 million last year. Financial services operating earnings of $65.3 million, compared to $68.9 million in 2021.
Financial services expenses of $21.1 million were up $3.1 million from 2021 levels, mostly due to $2.4 million of increased provisions for credit losses. While provisions have increased versus a historically lower provision rate experienced last year, loan portfolio trends remain stable.
As a percentage of the average portfolio, financial services expenses were 1% and eight-tenths of 1% in the second quarter of 2022 and 2021, respectively. In both the second quarters of 2022 and 2021, the average yield on finance and contract receivables were 17.5% and 8.5%, respectively.
Total loan originations of $307.6 million in the second quarter increased $21.8 million or 7.6% from 2021 levels, reflecting an 11% increase in originations of finance receivables, partially offset by decrease in the origination of contract receivables.
Moving to slide 11, our quarter end balance sheet includes approximately $2.2 billion of gross financing receivables, including $1.9 billion from our U.S. operations. The 60-day plus delinquency rate of 1.4% for the U.S. extended credit is the same as comparable pre-pandemic period of 2019 and reflects the seasonal improvement we typically experience in the second quarter.
As it relates to extended credit or finance receivables, the trailing 12-month net losses of $40.4 million represented 2.33% of outstandings at quarter end, which is down slightly from the 2.34% reported at the end of last quarter.
Now turning to slide 12, cash provided by operating activities of $140.8 million in the quarter, compared to $238.2 million last year. The decrease in the second quarter of 2021 primarily reflects an $87.7 million increase in working investment. The change in working investment dollars is largely driven by greater demand, including increases in receivables and higher levels of inventory this year.
In addition to demand base requirements, the inventory increase also reflects higher in-transit inventory amounts, as well as incremental buffer stocks associated with the supply chain dynamics in the current macro environment.
Net cash used by investing activities of $73.8 million, included net additions to finance receivables of $53.5 million and capital expenditures of $21.3 million. Net cash used by financing activities of $112.2 million, included cash dividends of $75.7 million and the repurchase of $251,000 shares of common stock for $53.8 million under our existing share repurchase program. As of quarter end, we had remaining availability to repurchase up to an additional $420.8 million of common stock under existing authorizations.
Turning to slide 13, trade and other accounts receivable increased $46.8 million from 2021 year end. Days sales outstanding of 60 days, compared to 58 days at 2021 year end. Inventories increased $89.5 million from 2021 year end and on a trailing 12-month basis inventory turns of 2.7 compared to 2.8 at year end 2021.
Our quarter end cash position of $812.9 million, compared to $780 million at year end 2021. Our net debt to capital ratio of 8.3% compared to 9.1% at year end 2021. In addition to cash and expected cash flow from operations, we have more than $800 million available under our credit facilities and as of quarter end, there were no amounts outstanding under the credit facility and there were no commercial paper borrowings outstanding.
That concludes my remarks on our second quarter performance. I will now briefly review a few outlook items for 2022. We anticipate that capital expenditures will be in the range of $90 million to $100 million. In addition, we currently anticipate absent any changes to U.S. tax legislation that our full year 2022 effective income tax rate will be in the range of 23% to 24%.
I will now turn the call back to Nick for his closing thoughts. Nick?
Nick Pinchuk
Thanks, Aldo. Well, that’s our second quarter. Markets that are resilient and getting more robust by the day. These are interesting times in the pandemic, inflation, supply interruptions, a war, and pop-up lockdowns, but Snap-on brings to this turbulence considerable advantage in product, in brand and in people. It’s enabled our team to cut through the turbulence, continuing a positive trajectory and you can see it in the performance.
C&I on a growth path again, with a 7.6% organic increase, despite being our most impacted business. RS&I, gains with repair shop owners and managers, driven by hardware and its expanding information portfolio, sales up 7% organically and NOI margin of 22%, up 120 basis points from last year.
And the Tools Group, gangbusters results, sales up 9.3% organically versus last year and up 28.1% versus 2019, eight straight quarters above pre-pandemic levels and NOI margin of 23.9%. And it all came together for overall Snap-on organic growth of 8.4%, NOI margin of 21.7% and an EPS of $4.27, all high watermarks despite the turbulence.
It was an encouraging quarter and we emerge from that period with rising momentum. It is a turbulent time, but Snap-on is driven by attractive markets, by unique strengths and by an experienced and capable team that’s achieved clear and consistent performance and period-by-period has become stronger and stronger in navigating the issues of the day. And we believe these inherent advantages will continue to prevail as we go forward on a clear an upward trajectory through the remainder of this year and well beyond.
Before I turn the call over to the, Operator, I will speak directly to our franchisees and associates. I know they listen in. The corporation is an organization where people come together to create a benefit for themselves and others that they could not alter individually. You have done just that again this quarter.
For your success in that endeavor you have my congratulations. For the energy and the skill you bring to our efforts, you have my admiration and for the commitment you unfailingly demonstrate to our team, you have my thanks.
Now I will turn the call over to the operator. Operator?
Question-and-Answer Session
Operator
[Operator Instructions] We can take our first question now from Scott Stember of MKM Partners. Please go ahead.
Scott Stember
Good morning and congrats on the very strong results.
Nick Pinchuk
Thanks, Scott.
Scott Stember
Can we talk about Tools? You mentioned that, everything was up, and it sounded like Tool storage had another very strong quarter. Was that related to the new mobile cart and maybe just try to size up how big tools storage was in the quarter and trying to figure out…
Nick Pinchuk
Now, I don’t like to give you — I don’t, I think, it’s — you start worrying too much of our quarter-to-quarter, Scott, Scott you go hikidi, bikidi, boo [ph] around here about, because things change depending on the models you bring up.
But I will say that Tool storage was the leader, it was double digits, a nice quarter and it came — and targets were in a factor, what happened at this time is, we started to get more of the bigger boxes out, the EPIQ and the Master Series. We had some great new offerings. Our Supernova Masters Series with the electric blue and the copper trim, that seemed very popular.
So it was a great quarter. Carts were continued to be strong, but EPIQ, the bigger boxes, the regular tool storage box, we could call Roll Cabs or not made the difference. So it was a pretty good quarter.
The Tools Group really, I mean, I think, it did have a great quarter. By the way, did I mention that the Tools Group NOI margin was 23.9% in the quarter? I think, I have mentioned that. That was — I think that says it all. I will tell you. And by the way, in the quarter hand tools were already — were also up and also — that’s a nice factor for us, up strongly. But the big impact in the quarter…
Scott Stember
And then…
Nick Pinchuk
Yeah.
Scott Stember
Go ahead. I am sorry.
Nick Pinchuk
Go ahead. Go ahead.
Scott Stember
I was going to ask about the selling to the van and off of the van the inventory situation right now on the van?
Nick Pinchuk
Yeah. Look, the inventories are up, the guys are crying for more inventory, when they go out there and their inventory turns are substantially below pre-pandemic levels. So the inventory turns are higher at this time and not below pre-pandemic levels, they are above pre-pandemic levels.
So they are substantially higher at this time. And the sell-through was better this quarter than it was last quarter. When you look at it overall, it seems to be right in line with our overall sales. So we think it’s moving along nicely.
I do believe our guys want more inventory. I do believe they want more. And I would say in our business, there’s still, we got a little better at delivering, but we still like, we still have a pretty good backlog. People are clamoring for our products still.
Scott Stember
Got it. And then lastly in RS&I, you talked about undercar doing really well. Is that related to the collision part of the business or is that just across the board?
Nick Pinchuk
Yeah. Well, it’s across the Board, but the collision business has been a star in this situation. We acquired Car-O-Liner a few years ago and we anticipated that collision with the deployment of the neural network around the sensors, around the sort of driver assist systems would make collision a very lucrative area and it seems to have played out.
So collision is among the top four undercar equipment, but generally it’s all roll pretty well. The independent repair shops are optimistic. They are seeing the, well, I said it in my call, investment up, spending up, technicians up, wages up, they can see it all come in through. So they are white hot in terms of their optimism, in terms of the situation. So it get them to invest more. That’s what you are seeing in undercar equipment.
Scott Stember
Got it. Thanks for taking my questions.
Nick Pinchuk
Sure. Thanks.
Operator
We can now take our next question from Luke Junk of Baird. Please go ahead.
Luke Junk
Good morning. Thanks for taking the questions. First I wanted to ask about originations is on positive this quarter up nicely both year-on-year and up really strong sequentially following some fits and starts recently. Can you just give us a peek under the hood there in terms of what’s driving that? Do you think it’s sustainable and what if any impacted last quarter system breach have on the numbers this quarter?
Nick Pinchuk
Last quarter, I don’t think had any impact on this quarter. But it was mostly in the last quarter where you saw, it might have had some impact on originations, because last quarter you — from a sales point of view, there was a skewing towards the back end of the quarter, because the breach was in the early parts of the quarter, so you saw that going out.
And as I said, last time we thought we had pretty robust sales in some of the big ticket items, but they hadn’t made their way through the vans yet necessarily and that probably worked out this quarter.
I think the big driver though, Luke, is the product. I think the optimism of the technicians and the product itself. I think, what does drive originations is the view of people saying, wow. I really like these EPIQ boxes I got and we had a more available now. We are getting better at delivering them.
During the pandemic we had some fits and starts, so we are pushing a little more carts and now we have a little bit more of the basic roll cabs. So I think that’s what drove the higher originations in this time.
We still see pretty good RA, the finance by the franchisees seemed pretty solid. That wasn’t down in the course. So that was pretty strong. As I said, hand tools were up. So I think it’s pretty much product driven.
What you see in the Tools Group, I mean, the Tools Group is on a pretty big momentum. If you look back over the pre-pandemic levels, they were up 9%, and what was that, Q4 2020 then 15%, then17%, then 21%, then 22%, then 24% and 28% this quarter. And by the way, they came through the quarter, they exited the quarter stronger.
They are on the mail train. They have got momentum rolling. And so I feel pretty good about that and that’s playing out in some of the now broader product lines in Tool Storage. We did, as I said in the last call, that doesn’t mean that carts were down any, they were still strong in the quarter just that the low cash got bigger.
Luke Junk
That’s very helpful. Thanks for that, Nick. And then second question within RS&I, I will ask on undercar equipment again. It’s been an area of consistent strength in that business going all the way back to the start of 2021, we count six straight quarters of double-digit growth overall. Where do you think we are in the investment cycle there, realizing that growth has been weighing on RS&I gross margins and looking forward to some point when that starts to normalize? How quickly would you anticipate higher software margins starting to come through at that point as well?
Nick Pinchuk
Well, I think, look, I think, higher software margins are, you are going to see it, one of the things you are seeing in our — remember we said, we are pivoting away from titles where we sold updates, we call it titles, but they are basically updates on software every six months, we are pivoting to a subscription business.
So that tends to stretch out your revenue was a little bit — it effects revenues in the quarter. And so, but our subscriptions are up deep, our subscribers are up deep double digits in this quarter year-over-year. So that seems to be working for us.
So we are pretty pumped about the possibilities in that, but you know you have some, I guess, I would say, recognition questions as you go through this period. So you don’t quite see it coming through, but I can see it coming through in the future.
And as I said, with the array of electronic products we have around software, from the diagnostic software to the Mitchell 1 software, to Dealer-FX to electronic parts catalogs to vehicle checks. We feel we are repair, information headquarters and it’s going to become bigger and we are going to see it roll through that business earlier.
Now if you ask me to expect to see the equipment business attenuate, I hope not. I am not hoping for it, just because it’s low margin, it doesn’t seem, it doesn’t mean I don’t want the profits, I do. So and I could see that go, that was down — you might remember, it was down, it was pretty much flat on its back for a couple of quarters, couple of three quarters earlier and it’s bouncing back from that.
We have seen a lot in independent repair shops and I would figure after the dealerships start to get used to the situation, I think, they will discombobulated by the low supply and what are they doing associated with this sort of a little bit — little more reluctant in situation. When they come online, I think, that will be even greater.
Luke Junk
Then if I could just sneak one more in, maybe this one would be…
Nick Pinchuk
Yeah.
Luke Junk
… good for Aldo to tackle? Could you just remind us of how rising interest rates affect the credit company, both in terms of funding, if at all, in the rates that you charge and in particular, I am just wondering if there is anything that you think is miss perceived that you would want to address about a rising interest rate environment? Thanks.
Aldo Pagliari
Thanks for the question, Luke. Actually it has a little affect if anything it might create a more favorable environment. And why do I say that? Again, we fund long. So if you look at Snap-On’s balance sheet, we don’t fund day-to-day.
So the rising interest rates do not have a foreseeable immediate impact on our borrowing capability, because as you could see there’s plenty of cash on the balance sheet and there is nothing that’s coming due for quite some time. So we are stable in terms of the cost of our funds going into that business.
Our stated rates have been pretty consistent really for decade plus. So and they are not the lowest rate out there, but they are lower than what might be available to people that are on a credit card format and things of that nature. So we think our rates are appropriate for the credit profile of the customers that we serve, we think that they — those types of customers recognize that. So we are the kind of the lender of choice if they do decide to engage in any type of lending activity.
And I think because we provide that stability, it gives a little bit a form of reassurance, so as interest rates go up competitors rates, if they were ever considering them, and when I say competitors, I am thinking of things like credit cards. So as interest rates are going to be going up for people that are in the subprime category.
So we are going to be pretty stable and our approach is going to be pretty consistent. Yeah, I think the competitions rates might be going up, which you could argue maybe creates a slightly more favorable environment.
Luke Junk
Okay. I will leave it there. Thank you for all the color this morning.
Operator
We can now take our next question from Bret Jordan of Jefferies. Please go ahead.
Bret Jordan
Hey. Good morning, guys.
Nick Pinchuk
Good morning.
Bret Jordan
When you think about the organic growth, and obviously, it’s pretty inflationary environment, could you talk about sort of with the contribution from units are versus the contribution from price and then, I guess, as a follow-up, I think, well, I will ask that first then I have a follow-up.
Nick Pinchuk
Go ahead. Go ahead. Ask the follow-up one.
Bret Jordan
The follow-up, I think you called out, I think, in C&I and RS&I sort of inflation in some of the cost of goods. And could you sort of talk about where you are seeing, is it metals, labor, where are you seeing inflation, what you can do to sort of pass that through and the timing of that?
Nick Pinchuk
And by the way, just, Bret, before the Tools Group will execute — Tools Group guys will execute be if I leave this conference call, not saying that it also have inflationary impacts on it and price is going up. So it’s not just RS&I and C&I. They also have to deal with that and I got to give them credit for that.
But look, here is the thing, it’s hard for us to determine, because we know we have some pricing, but it isn’t the majority of it. Looking at our factories, we know we have products in demand. There is rolling off there and our guys are up to their eyeballs in demand. So we know that’s a positive situation.
The other thing is it’s hard, because you know we have list prices. But the list prices don’t — are very from product to product and they come out on an average, you might say your raising sales 3.5% or something like that but products.
And then overlaying on top of that we have a lot of new tools, we keep roll in new tool. In fact, million dollar tools we have dozens a quarter rolling out and then, across the network. And then we have promotions that occur week to week and they can be lean or rich and taken up the big effect.
So it’s hard for us to say. I would say the minority of the increases in pricing and the majority is in volume for us. We think that’s the situation in this situation in our environment. Now, that varies from Group to Group and so on.
Now if you talk about where we are getting the biggest impact, our biggest inflationary impact, Bret, is trying to buy on the spot market, because we have said we want to deliver the best we can. We have demand. We want to deliver. We are not keeping up with all the demand, but so we are buying like chips on the spot market. And I can go — that can fluctuate wildly. We buy components for power tools and other things on a spot market, that can move wildly.
If you look at commodities, I would say, look, we buy several, many grades of steel, but if you look at steel for tool storage and steel for, let’s say, lifts, hot rolled and cold rolled, there both coming off a little bit. They are getting a little better. They are coming down.
If you look at steel for hand tools, it’s at its top and now they are still not back to the steady state levels but they backed off a little bit. The steel for hand tools, which we call rod steel, that’s pretty much reached the top level and it’s flattened out but it hasn’t abated for us yet and we are not seeing too much abatements in freight, you see those kinds of things flowing through.
I would expect this stuff, as I believe that as the COVID turbulent start the micro viscosity start — stop happening, you are going to see the stuff start to drift downwards, because you are not going to have the interruptions in supply and therefore it’s going to get more regular and therefore the prices are going to come down. But I don’t have a crystal ball on that. That’s sort of our view of the situation.
Bret Jordan
Okay. If you were to think about your price inflation, your sticker price inflation year-to-date, I guess, how would you — is it up, mid-low, mid-single digits on pricing?
Nick Pinchuk
It’s hard for me to say because it changes. It’s all over the map depending on where you are. In the Tools Group, you have a list price and the other places, you are pricing product-by-product and it depends on the size of the product and a lot of different things. So, all I am saying is, I think, if you wanted to step back and you look at our pricing, it’s the minority of our growth.
Bret Jordan
Okay. Great. Thank you.
Nick Pinchuk
Hopefully get share, get volume out of it, Bret. Okay.
Operator
And we can now take our next question from Christopher Glynn of Oppenheimer. Please go ahead.
Christopher Glynn
Hey. Thanks. Good morning.
Nick Pinchuk
Hi, Chris.
Christopher Glynn
So, Nick, some — hey. Some pretty strong comments on the momentum and the tenure across the Tools Group. I did want to drill down into that in terms of, we — the relative contributions of market penetration and overall kind of advancing into technicians not traditionally served versus a revenue per technician type of equation.
Nick Pinchuk
Yeah. We don’t have — it’s hard for us to get a handle on all of that, because you tend to start out with people at lower levels. But we are adding technicians. I can’t parse that thing for you. We are certainly aiming at that and it’s been successful, but we are also selling more to the existing technicians because their wages are going up, they are getting more optimistic.
And also it’s not a situation where we see static activities. I will say the number of technicians we have on the books are going up and that includes some new people. So that’s about all I can give you on that. I think there are both things in play at least, because of the…
Christopher Glynn
Okay.
Nick Pinchuk
And it makes sense. I just want to add this, because it makes sense, because we believe it’s great for us to get new technicians and that’s a one component of growth that I have talked about for a dog’s age here.
But it’s also in this environment clear that existing technicians, young or old are going to need new products. And they are actually going to need more a greater array of these products as you get more and different powertrain, as you get more of these automated features in the system. So we anticipate both effects being lucrative forward motion, it would be wrong to think that either one was maybe — to think that they weren’t both good avenues for growth.
Christopher Glynn
That makes sense. Yeah. It was kind of meant to particularly drill into the expanding the technical…
Nick Pinchuk
Sure.
Christopher Glynn
That’s great. And then on C&I, clearly a stronger quarter year-over-year and sequentially versus kind of the trends we have seen in the past few quarters, a little more kind of stable, steady. So wondering if your sense of things getting rolling there versus you kind of got a bit more out the door of this quarter?
Nick Pinchuk
No. I don’t, well, we like to think we got bit more out the door. But I don’t think that’s it. I think, look, I think we are making a little bit of penetration. As I tried to say in our remarks, we are getting better at handling the turbulence. I’d like to say we are not as dumb as we look and a lot of people would say that would be impossible.
But we are kind of learning quarter by quarter and C&I has the longest learning curve, because they have the most impact of all this stuff that’s happened. I mean, C&I in Shanghai, there is that one thing — by the way, we were up in Asia in C&I, so they did pretty well in that regard.
So what we are seeing is, we are seeing our ability to manage the turbulence better. We are also seeing some warming, like in this quarter, one of the things that was very encouraged by is that the military wasn’t down as much in the quarter. The military is kind of coming back. It’s still down. You know what I mean, I am still — I don’t like it, but it’s still — it’s coming back. So it wasn’t as big of a hole this quarter, as it has been in the past.
And also general industry, I don’t know if you saw that comment, general industry was up and aviation in total was up, particularly international aviation believe it or not. So, general industry which implies the widest category for us, in terms of that, that has so many different segments and that was up strongly. So I kind of think the critical industries are coming, getting stronger, recovering from the impact. So we feel pretty good about that. In our business are looking better.
Now, that’s why we were particularly pleased about this 7.6% growth organically in C&I. That made us — that gave us great encouragement. And in reality, the 14.4%, yeah, it was down 140 basis points year-over-year, but 14.4% aren’t chop liver for C&I, it’s not so bad. And was up 100 basis points versus last quarter and down 2020 versus 2019 against the pretty severe impact of acquisitions and currency, I think, it was 80 basis points. So those — they are points were pretty good for us, we were encouraged by it.
Christopher Glynn
Great. Thanks for the color.
Nick Pinchuk
Sure.
Operator
We can now take our next question from Gary Prestopino of Barrington Research. Please go ahead.
Gary Prestopino
Hey. Good morning, everyone.
Nick Pinchuk
Gary, how are you?
Gary Prestopino
Oh! I am just fine. Thanks. Hey, Nick, just a question, as it evolves with all the hybrids and electric vehicles that are starting to come into the car park or a bit in the car park for years now. With your product set there, right now are you seeing demand from technicians for specific hand tools or more diagnostic and calibration tools in the repair of these kinds of vehicles?
Nick Pinchuk
I think you see more demand for the diagnostic, but you also see the hand tools. I think, if you look at the — they are in the car park, but they are — if you look at — it’s one thing to look at it versus the sales. If you look at them in the car park, it gets to be pretty thin. You are not seeing — not that many garages are seeing a lot of them.
So the guys are talking to us about this and we sell hand tools and we sell some diagnostics that you have — it’s not a special diagnostic form, but it’s a diagnostic that would have the capabilities to deal with those things.
So you are not seeing — they are still pretty thinly distributed across unless maybe you are in Southern California or something like that or maybe New York City or some, you might see some of those garages, but we are not seeing huge demand.
Mostly we are getting ready for what we think will be the demand going forward. We think this is going to be a tidal wave. And so that’s one of the reasons why we acquired Dealer-FX to get a look at these things.
Gary Prestopino
Okay. Thank you.
Nick Pinchuk
Sure.
Operator
We can now take our next question from Ivan Feinseth of Tigress Financial Partners. Please go ahead.
Ivan Feinseth
Hi. Thank you for taking my questions. Congratulations on another great quarter and the great results.
Nick Pinchuk
Thanks, Ivan.
Ivan Feinseth
When you were talking about like you bring on a new tool and it sold out pretty quickly, how fast can you ramp up? Is it because you didn’t anticipate the demand would be so strong or you are seeing still dealing with shortages and how quickly can you ramp up for another production run?
Nick Pinchuk
I would say, we didn’t expect it to be that big. This one — the couple — of course, this is an earnings call, so I pick some of the ringer as you know and I put them on. But the thing is that, those guys blew out the doors and we didn’t anticipate it be that good, otherwise we would have done a bigger run to begin with. So that’s the situation. Just the demand was really high.
Now, on top of that, I will tell you that we believe we need more capacity, because we have demand, so we are looking at that situation wise and we will have to go back and try to schedule another run in the handful plants, which is already over scheduled, but we will try to put that in and roll out with some more.
Obviously though, if you are do that, I mean, the reason why we are running a hand tool plants, they got a lot of demand. So we see ourselves that sitting on some further opportunities if we can just rollout more product and we are working on it. In terms of expanding the plant we have an expansion plan for our Milwaukee hand tool plants, where this plans was built.
Ivan Feinseth
And then as your franchisees interact with OEM mechanics, what kind of feedback or discussions are they having about preparing to ramp up for new tools to handle the EVs that are at some point going to explain…
Nick Pinchuk
Yeah. Look, I think, they are having talks about that, but generally you are talking about insulated tool, some of the obvious stuff like some diagnostics stuff, some insulated tools, some lift tables for the batteries, those kinds of things. And then what will happen, Ivan, is the mechanics don’t know yet what they don’t know, you know what I mean, about preparing the tool.
Ivan Feinseth
Yeah.
Nick Pinchuk
Those new cars get into the dealerships and the mechanics will discover where they need new tools to deal with it. That’s a whole other level of array. So we are talking right now about the common things that you might — you observe from early days from the — you hear from the OEMs, are you see the very, very — very early days in the OEM garages and those are the things that I just talked about like insulated tools and some diagnostics some analysis routines and also some lift tables and other stuff around electric vehicles and then you are going to hear as a guys start repair them, let’s say, geez, these particular vehicles are different, I need a special tool to do this and that’s where we start rolling out our activity we start building more tools to match. That’s a whole other array and that’s one of the thing really takes off for us.
Ivan Feinseth
And then I assume you are going to need some kind of new types of lifts to handle the access or battery swapping because of the way is…
Nick Pinchuk
It’s also true — so true…
Ivan Feinseth
Yeah. It…
Nick Pinchuk
Also true. I didn’t mention that, but that’s right…
Ivan Feinseth
And the same thing…
Nick Pinchuk
That’s — reason I have mentioned is handled by another division. But that’s also true. A lot of this stuff is going to — the equipment — the whole equipment line that doesn’t go through the vans is a whole other issue that’s going to need new stuff, because these things are heavy, as you know being a car expert.
Ivan Feinseth
Okay. Well, then, I guess, then the same thing is going to hold true for undercarriage and collision, because the way the EVs are structured and the way you have to repair them around the battery and the whole structure eventually is going to be a huge upgrade cycle for undercarriage and collision, right?
Nick Pinchuk
Correct. Correct. You got it. That’s right. I mean the batteries are, before I — I think most people don’t realize, how heavy these batteries are actually. There’s a lot of weight underneath that — under that chassis. So it’s going to be an issue. It’s going to revolutionize garage I believe as things go out.
And again, I want to point out that, the OEMs will figure this out early, but then there will be a lot of unforeseen complications that change it again after your first wave of change. So we are pretty pumped. That’s why I say we are entering the golden age of car repair.
Ivan Feinseth
Yeah. Very exciting. Congratulations again and look forward to ongoing success.
Nick Pinchuk
Okay. Thank you.
Operator
This concludes the Q&A session. I would now like to hand the call back to Sara Verbsky for closing remarks.
Sara Verbsky
Thank you all for joining us today. A replay of this call will be available shortly on snapon.com. As always, we appreciate your interest in Snap-on. Good day.
Operator
This concludes today’s call. Thank you for your participation. You may now disconnect.
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