David MacGregor: Right. Good. Thanks very much gentlemen.
Operator: The next question is from Gary Prestopino with Barrington Research. Please go ahead.
Gary Prestopino: Hi and good morning all.
Nick Pinchuk: Good morning, Gary.
Gary Prestopino: Nick, can you maybe – could you maybe just help me out here? I mean, the market for repair – auto repairs is very strong. Sometimes takes longer than you would expect to get your car repaired, even on the collision side.
Nick Pinchuk: I agree.
Gary Prestopino: But yet you’re saying your power tools are down and diagnostics down. Don’t the technicians really need to have these products in order to do their jobs correctly and efficiently and quickly. So I guess what I’m asking is, is this just really a function of maybe what’s going on with the Tools Group is that your diagnostic products have kind of permeated the channel, and there’s not a lack of demand that is maybe being driven by the fact that everybody’s needs have been taken care of. And then on the other side, the power tools, maybe there’s just hasn’t been the opportunity to innovate as much as you had maybe last year to drive growth? I’m just trying to square all this together.
Nick Pinchuk: Look, I think the thing is you could, in diagnostics, we did sell the quicker payback items, the SOLUS+. It was the big ticket ones like ZEUS which is quite a bit more expensive that didn’t sell. In power tools, yes, it can be – it can follow very strongly what’s introduced in a certain period. At time, the power tools, I think, looks worse than it is, like I said, it was up sequentially with some reasonable gains. So I think we see progress in the power tools. So I do think – I don’t think we’re seeing that. We’ve seen it before where technicians will focus on things they have an array of things they want to buy from Snap-on. And often, when they’re confronted with this, they make a transition to say, well, where – how can I – I want to see the world play out a little bit more.
I’ll buy this wrench or I’ll buy this smaller box or I’ll buy a small diagnostic or I’ll maybe hold on to my power tool a little bit longer. People need the products, but on the other hand, it is an imprecise thing. Sometimes they’ll say, okay, I need a particular power tool or a diagnostics because I had trouble last week on this particular on some Toyota or maybe on a BMW. And they’ll say, “Well, I’ll wait a little while because I won’t see another BMW for a month or two or a quarter three or four months. You’ll see that it’s an imprecise situation. Simply, our view of it is more – it’s always influenced by product, about the new stuff that rolls out, it’s a complex array. But what’s happening, at least as far as we can report and I’ve talked to a lot of guys is that technicians – one guy in Northern California said the techs are scared.
Another guy talked to in Kentucky – [indiscernible], Kentucky said they’re getting involved in the everyday news. It’s weighing them down. I got another guy in Nevada and Reno, we said, they’re assessing over the election. So I’m telling you, this is kind of a – it’s sort of saying, where is the environment going to go? I’m going to keep my powder dry for a while. I’m going to just take it bit-by-bit, I don’t want to take a big bite – so when they want to figure out how to repair cars, they don’t take a big bite.
Gary Prestopino: All right. And then I guess the last – you had mentioned that this had happened before, I think, in The Great Recession.
Nick Pinchuk: And in the COVID – Gary and in the COVID.
Gary Prestopino: So how long did this take to flesh out? Was this a couple of quarter phenomenon?
Nick Pinchuk: In the COVID, I would say it took three quarters, maybe two quarters for people to get used, and basically that was driven more by the – we’re talking about attitude. It took about two quarters, maybe 2.5 quarters for them to say, “Oh, the all clear is blowing”. Nothing is really going to happen. We’re out of the COVID and the great financial recession is a little longer. But it all depends on how use they get to it. Now we help this by pivoting. Remember that in this situation, we help by giving them more small bites. So some of this has to do with matching the product – the new product available that’s analyzing them with stuffs they’re willing to take on, and that’s what we’re doing.
Gary Prestopino: Okay. Yes. Thank you.
Nick Pinchuk: Certainly.
Operator: The next question is from Luke Junk with Baird. Pleaser go ahead.
Nick Pinchuk: Hey Luke.
Luke Junk: Yes. Good morning. Thanks for taking the questions. Maybe just pivoting on that last point there, Nick, just trying to get a feel for your gut of how much you think is under your control as you make this pivot and like you said, just matching new products with where the demand is right now in terms of I guess I’d be interested to get your perspective on the last six months. Just how much that feedback has changed of what mechanics want? And to what extent are the franchisees able to kind of give you demand clues or is it more about kind of pushing the right products to the franchisees and helping to market the products?
Nick Pinchuk: No. No. No. Demand clues. I mean, fundamentally, it’s on a macro basis, Luke, I don’t know if it’s six months. So this sort of started sometime in October. I don’t know how long it is. But the thing is, is that it’s pretty much about what people will say, if I buy this now, I can get a payback now, and I don’t get committed for longer terms. So I’m not – that’s a description in general. Of course, everything I’d say about the technicians probably doesn’t apply to every technician and every garage is probably a great landscape for this. But that’s simply what we’re doing. And so we’re getting feedback from the franchisees on this and we’re doing a lot of customer connection on it. I’m talking to franchisees all the time.
We’ll have the NFAC in here in about four weeks. I’ll talk to them about it. We’re making a lot of cost. So we’re getting feedback from those guys, and we have pretty good feedback right now. We know where we’re trying to go. And so that we believe that will work for us. Of course, it all won’t work but once we execute on that, then we’ll iterate to hone in. Now how long that takes. And as I said before, I think our view is our standard is to keep improving I’m not so sure how quickly. But I do think we have the capacity to do it, and we’ve done it before.
Luke Junk: And then maybe a question on RS&I if I can sneak it in, just the expanded opportunity right now seeing with OEM dealerships, especially kind of new technologies and new things coming into the market. Just that seems more of a secular opportunity. I mean, do you see the opportunity is any different versus this business historically either in kind of the scope of the opportunity or even the margin opportunity maybe?
Nick Pinchuk: Look, I think three things about RS&I. One is that you’ve got – you’ve got the opportunity associated with the number of new models people are launched. And I thought a slant guy on TV about a month ago, he was talked about 30 new models. I don’t know how we’re going to get all of those. But every time a new model comes out, this is a good business for us. And every time they have a warranty kind of recall and stuff like that, and that business has been pretty good now for some time. It was up nicely in the quarter, double digits, and the profitability is strong now, so that’s a good bit. And so that’s a unique at this point, and I think it will keep going as the technologies keep changing. Then you see the equipment business.
The equipment business wasn’t – it was off, but it wasn’t as strongly up because Europe was pummeled by the equipment business. Those recessionary businesses in Europe. I mean, Germany being a recession was a big blow for us in this situation. And so that was harder. That will come back. But it does have the collision business and the equipment business in North America, all of which are booming. And those are nice margins. The margin was up in that business. So that’s fueling some of it. And then our software keeps doing pretty well. We talked about the heavy-duty software. And we did have this legal benefit, which was in this ore, and it confirms the proprietary nature of our database. So I think that’s – all those things are better than a poke in the eye with a sharp stick.
Luke Junk: I’ll leave it there. Thanks, Nick.
Nick Pinchuk: Okay.
Operator: The next question is from Sherif El-Sabbahy with Bank of America. Please go ahead.
Sherif El-Sabbahy: Hey, good morning.
Nick Pinchuk: Sherif, how are you?
Sherif El-Sabbahy: Doing well. Thanks. And thanks for all the great color you provided. I just had one small specific question. Just within power tools, are there any specific markets or end users that saw an outsized pullback or drove the decline year-over-year?
Nick Pinchuk: Say that again, please. Sorry.
Sherif El-Sabbahy: Are there any specific markets or end uses for power tools that saw an outsized pullback or stood out when you were kind of looking at the numbers?
Nick Pinchuk: No, I don’t think so. I think there is a constant movement between pneumatic and cordless in the power tools or a lot of people are converting to cordless. Not everything can be converted to cordless because people want to have continuous power and of course, the pneumatic will keep going. So if you’re doing something over and over, sometimes people prefer pneumatic guns, because they don’t run out of battery and they’re lighter and all that stuff. So if you have a repetitive situations. But there’s a general motion to cordless – we haven’t seen any – if you look at the nature of the product line, products and power tools, what you see is sales that follow introduction of new products. Every time we bring out a new product, that tends to raise that particular category.
