Next in the lineup today, we have Snap-on. I'm very pleased to have Nick Pinchuk, the Chairman and CEO. Nick, I would love it if you could give the audience some background on Snap-on, you know, the business mix between the four reporting segments and who the core customers are of those segments and, you know, then the overall addressable market.
Sure.
Thanks.
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, you know, the kind of thing, I served the drinks at some of the meetings, you know, things like that. You never saw the parts and service guy in the building.
Mm.
They worry about new cars. They don't worry about repairs. Ours is quite a different business. That is essential to understanding us. Our, 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. That's about 40% of our business. The unique thing about that, I think, is they sell to the actual user, the end user, the guy who twirls the wrenches, the technicians in the shops.
In a way, that creates a distinctive nature for Snap-on because we may be 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 of the end user. It creates a deep understanding of the marketplace. That'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.
Mm-hmm.
Great brand, iconic, and it's the outward sign of pride and dignity that working men and women take in their profession. We have a second group, which we've organized more recently, not so recently, like 15 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. 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 would use, these are more like semi facilities.
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 driver assist systems. That's about 20% of our business. Grew about 12.2% in the quarter, the margins were 25.3%, up 50 basis points year-over-year. There's another piece of the business, which is called the commercial and industrial business. That's about 26% of the business or 27% of the business. 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, the Snap-on customer base is that we sell in the critical. 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 anyplace else. For example, if there's any commandment at Snap-on, it's thou shalt not sell to DIY, do it yourself people. We do not do that. That business sells to customers that are in, say, the military. You know, if the 50 caliber bullets are going overhead, I think repairing your vehicle may be pretty important to you, pretty critical as we use. Or oil and gas or aviation or heavy industry or heavy-duty truck, things like that.
That tends to be more international business for us. While the first two businesses I talked about, the tools business or the RS&I business, they would be 75% in the United States. The C&I business would be 45% in the United States. It's a much broader business. That particular business is where we say we roll the Snap-on brand out of the garage. Finally, we have a credit company.
Mm-hmm.
A couple billion dollar portfolio, 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 could be that much money, and they finance them over a four year period. That's part of the business. There's financing of the franchisees themselves, their trucks, their inventory, and so on. There's a small piece of the business which works with RS&I that gives financing to garage owners. That's the summary of our business. It's pretty much a business rooted in auto repair, except for C&I. We're rooted in the criticality-
Mm-hmm.
70% of which is auto repair. 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.
Great. Well, thank you. That's very comprehensive. I guess, you know, you mentioned some of the key factors that would drive, you know, the purchase of a Snap-on tool or a diagnostic unit. I mean, it's really about that penalty of failure being high.
Yeah.
the need to invest in a quality product. I guess, how do you think about the macroeconomic factors that kinda drive your business or that you think about when you're planning your business for, you know, the next year or two?
You know, I've now been the CEO for over 15 years.
Mm-hmm.
I was here when we had the great financial recession. I was here through the COVID. In fact, the macroeconomics is a, is not so decisive for our business.
Mm-hmm.
People keep repairing cars almost come hell or high water. Therefore, that's one of the great things about criticality itself, is it has to be done. Otherwise, you know, you need the oil and gas. Aerospace keeps going in some cases. They go up and down.
Mm-hmm.
Auto repair keeps going. Even in the COVID, the garages only stopped for, like, a blink of an eye. I would say couple weeks.
Yeah.
In fact. In effect, the critical mobility of America had to keep going. Macroeconomics doesn't affect our trajectory as dramatically as other businesses, I think, generally. You know, sometimes it will affect the mix of our products. For example, in a recession, and this is what happened in the COVID or the great financial recession, we will see technicians buy 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 gonna see the payback come over a longer period of time. The level of uncertainty that visits on the mentality of technicians tends to influence the mix of that purchase.
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, these guys who drive the trucks to sell. They only have 24/7. To the extent we can enable them more, we see our sales go upwards. Someone asked me this earlier today. They said, "Well, do you get cyclicality between tool storage, let's say, big boxes that are $10,000 or smaller items?" We do not. What we see is it's all governed by the franchisee's time. If we expand the franchisee's time and we have a reasonable product, they will sell more.
Mm-hmm.
That generally is what drives our business. The other thing, you can then go to RS&I, and you can go to C&I, and because they deal with bigger organizations, you know, even a garage is bigger than a technician, even a small garage, Joe's Garage. C&I the commercial industrial business might sell to, let's say, a manufacturing plant. They tend to be more impacted by the macroeconomics, either by direct effect on their business or the mentality. For example, the dealership business, RS&I grew at, what, 12.3% in the quarter I said, you know, organically.
It's up over 30% over pre-pandemic, 31.3% over pre-pandemic levels. 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, you know, 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 kinda going away now. What we see in our business right now is the technicians are very strong, you know, because they've been through the COVID unaffected. Therefore they have great confidence in themselves. They're not affected by, say, SVC.
Right.
They're probably not even thinking about that. They probably even don't know what it's about. The garages are starting to come back because they're starting to see a return to more normalcy in their system. The RS&I business is 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 US for them, so that's made a little bit of a more of a different cocktail in terms of that business. Generally, the macroeconomics in the tools group, not so much in effect. RS&I, a little bit more. C&I, more.
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.
Everybody does.
They don't. Not nobody, but I think almost every tool storage box that's sold or every big ticket diagnostic unit is financed by the company, you know. For example, originations were up 19%, 19.3% in a quarter, and it matched the sales of the product. People ask us so often, "How come originations aren't up?" You know, they were asking us about one year, 18 months ago, you probably remember. "How originations aren't up? They're down year-over-year." Because we're selling more hand tools than we're selling tool storage boxes.
Mm-hmm.
Generally, there are stories of back when the boom was in Ohio, you know, Ashtabula and places like that, of people getting on the vans and peeling off the Benjamins and paying for a tool storage box in cash.
Mm-hmm.
That doesn't happen very often. When they finance, they generally use our business, 'cause it's much more convenient for them, and these are sub-subprime customers who fundamentally might have difficulty getting financing anyplace else. 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. I guess just kind of thinking about in the last three years, there are a number of, you know, exogenous impacts on your customer base. You know, the pandemic and subsequent decline in auto and air travel. You know, there were the PPP loans, right? Did that impact how your customers thought about, you know, spending or investing on tools and on?
Not the technicians.
Yeah.
No, the technicians, you know, I think, I think generally the people of work weren't so impacted. People in the factories, who we sell to factories, 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.
Mm-hmm.
I don't think that distorted our numbers very much. You know, one of the things we asked ourselves, are we getting a boost from things like the, you know, the money the government was passing out and the bonuses? Generally the people I talk to in the garage are saying, you know, "I'm gonna pay down debt." In some ways we saw people paying off their loans to the credit company earlier.
Mm-hmm.
Some of that.
Mm.
Okay, and we also saw. They'd say, "Well, I'm saving the money because I think the government's gonna come back and ask for it later anyway.
Yeah.
They had a cynical view of that. It really didn't affect our day-to-day sales much at all.
Okay. Yeah, but either way, it's been sort of an unusual, like, last couple years. Then, you know, inflation obviously was kind of the story of this past year. Do you feel like 2023 could be a normal year? I guess if not this year, when do you think we kinda get there?
You know, 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 two years have been normal.
Mm.
Yeah, maybe you have inflation and the accompanying pricing on top of that.
Mm
...somewhat that would drive things up, but I don't detect any different behavior in those customers. I think sometimes when you sit at, you know, where we, you know, where I sit anyway, where you deal with people and, you know, with governments and other things, you get an aberrated view of what the people of work think.
Mm-hmm.
In fact, I would say that I've never seen more diversion between the physical economy and the financial economy than now.
Mm.
I think if you're talking about the financial economy, and thus maybe bigger companies, it was an unusual period, like for C&I and so on.
Yeah.
For the auto repair business, which is 70% of our business, I don't think it's that much different. Yeah, overlay of inflation. Okay, you deal with that. Other than that, I don't think it was any different.
Okay. Main Street has been sort of.
I think so.
...fairly normal-
Well, Main Street work. During the COVID, we never stopped working.
Mm-hmm.
None of our factories stopped. We were in the office every day because we couldn't not be in the office if the factories are working. How can you face the factory workers, right? 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. Yeah, you had to wear masks and all these things, but in reality, the business itself was kind of about the same.
I wanna sort of switch gears a little bit to sort of a bigger picture question about, you know, product cycles.
Yeah
...just 'cause in, you know, and obviously this is not like new vehicle manufacturing, but, you know, products is, you know, 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, on a given line or a brand-new introduction?
It depends on the product. You know, software, we have a new software edition every six months.
Mm.
You know, probably we restructure the software package every two-three years, you know, things like that, you know. 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 two-three years.
Mm-hmm.
Tool storage, you might do the same kind of thing with a variation on top of it. Hand tools, they tend to be longer, certainly longer wave. You gotta overlay on top of this the principal driver for our product development, which is the changing of the vehicles.
Mm-hmm.
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.
Mm.
It's basically the same product aimed at a particular, a particular selective application in the auto repair business or in any other business. Generally, we're constantly turning over our products. We have 85,000 SKUs. 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. There's always these special models that are coming out to deal with particular difficulties in the car, like the F-350 truck that needs the special wrench to take out the rear spark plugs.
Mm.
For example, the new electric cars For reasons, you know, I don't think anybody ever thought of, are gonna need all new lifts. Because you can't have a lift underneath the car because too often you're gonna have to drop the battery.
Mm.
You can't fit the battery if you're holding up the car with conventional lifts anymore.
Mm-hmm.
That's something I don't think. You know, if somebody said, "Okay, we're gonna have electric cars," anybody would have thought of, you know. Until you actually saw them try to do this in a garage, and then you realize, "Wait a minute, I need all new lift points.
Yeah.
Seems like such a simple thing, right? That happens all the time in our business.
That brings up an interesting question too, because we hear this a lot just about how, you know, EVs are gonna disrupt the entire auto aftermarket. I mean, it seems like that could be a pretty big opportunity, right? When you see these changes happening...
Change is our friend.
Right.
Actually that's what drives most of our product, is the changing in the vehicles. This is the whole thing. You know, what's interesting about this is, 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. 80% of those repairs have nothing to do with the drivetrain, which is the electric vehicle. They're all gonna continue, if not get more complicated.
Right.
That's number one. If anybody thinks that a new, a relatively new design of a car is gonna be more trouble-free than an older design, think again, right. I think so. You have that kind of situation there, and then you also have our history. You know, I wasn't in the business at this time, but let's say the mid-1990s, the number of electronic trouble codes on a car were measured in dozens. Now they're measured in tens of thousands, right. A car has become more drive-by-wire. In reality, the demand for hand tools has only exploded. How do you figure that? And the reason is because the compartmentalization of the cars, the remaining mechanical parts are even more complex and having to fit into smaller spaces and so on. I'm pretty...
We are very, very confident that any change, whether you're talking about electric vehicles or plug-in hybrids, which are, which would be both, or in fact, just regular hybrids or hydrogen, we'll have a whole array of new products that mechanics are gonna be needed to do, needed to work on.
I guess that brings up another question too just about how. You know, you typically think about a tool having a replacement cycle, right? I mean, I've got tools in my garage.
Yeah.
Like, when one is, like, not working anymore, I get a new one. I replace that existing one. 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 a much broader view of this, right?
That is the point. That is the point. It doesn't matter. I mean, they're gonna need... The diversity of the car park creates much more need for more tools. I mean, electric cars are gonna need different tools, but the internal combustion engines aren't going away.
Right.
I just talked to a guy outside from your company, who's from Southie in Boston.
Mm-hmm.
They have no driveways. How are they gonna use electric cars?
Yeah.
Right? They're not gonna. He was talking about it. They're not gonna be able to wanna. Those people are still gonna use. They may eventually convert, but they're not gonna convert quickly.
Yeah.
You know, you have this huge landscape throughout America that's gonna keep creating this situation. 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.
Mm-hmm.
Having been in the auto industry myself, when you design a car, you design it for appearance. Nobody buys ugly cars. You design it for performance. You design it for cost. You design it for reliability. You have to have emissions. You have to have safety. By the time you finish with all the design parameters, you have no degrees of freedom left over for repairability.
Mm-hmm.
Every new car has a new challenge. This is what drives our business.
Great. I guess, you know, one of the things that really differentiates, Snap-on compared to, you know, other types of tool manufacturers is this franchise component.
Yeah.
I wanna talk about people for a bit and just how did that get started and, you know, 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. Generally, I think it's from the very beginning. One of the things that happened is, when the company was founded in 1920, it was founded on innovation. There was 7.5 million vehicles on the road versus the 280 million vehicles on the road today. This guy had an innovation. Took five handles, different dimensions, different configurations, a T and a whips, a crank, put them together, five sockets of different dimensions, and fashioned them so they snapped on interchangeably. This is a great deal, you know. Right? It revolutionized tool sets all over the country because it made the tools much more efficient.
What he told his salesmen to do is eschew the distribution, and the distributors of the day. Normally, you sold tools through distributors.
Mm-hmm.
Go right into the garage. The other thing he said is, "Lay those tools out on green felt as if they were as precious as surgeons' knives," implying if that mechanic used those tools, he would be doing something special. He would declare to the world that he's doing something special, perhaps as special as a surgeon. That's the core of the franchise business. I think it was in full force by the 30s. It's been around a long time. How we recruit people, we've been up and down on this. We had some rough patches in the late nineties. First and foremost, we wanna 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 end up with bankers.
They wanted to do something different, and they said, "Gee, I love mechanical." We do that. You wanna be organized. 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 'cause when you have 3,500, if you need one in South Peoria.
Mm-hmm.
You may not have a guy waiting or a gal waiting in South Peoria. Usually you have, generally across the country, we have people we can put in place. Because everybody wants to be a Snap-on franchisee because, you know, they look at it like they make their customer's day. You may not believe that, but it's true. When they show up in the garage, it's like an event for the technician, and the technician wants to talk to them. This is one of the reasons why. Remember I said that the Snap-on brand is the outward sign of the pride and dignity that men, working men and women take in their brand. What other 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 their life for better or worse?
Mm-hmm.
What other brand has people putting their ashes in a toolbox?
That's certainly something.
Well, somebody said to me, One of the franchisees said to me. This is, I think, says why we're able to recruit the people. He said, "You know, 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 of your-.
By the way, one thing I would say.
Please.
Okay. It's the most powerful brand in America with working men and women. Its power decays exponentially off the first floor of any building.
Mm-hmm.
Therefore, it is not so visible to white-collar people. If you walk in the county fairs of America, you will see this.
Yeah.
You will see our brand displayed.
Well, I definitely see-
Widely.
-the truck outside of my local dealership, like, every Monday.
There you go. Right.
It's there. I'm curious how many of your franchisees or how many Snap-on trucks are operated by sort of multi-franchise owners versus kinda smaller independents.
I know this number. It's, let's say somewhere between, let's say 13%, like, 10% and 15%. That varies from time to time.
Mm-hmm.
It's a little bit north of 20% of the vans are in those. I think the biggest is six.
Okay.
One or two guys have six, 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 to pump that 24 hours a day thing.
Mm-hmm.
it's not as common as you might think because I think the basic requirements of the job are somewhat incompatibility with sitting back and managing-
Mm-hmm.
the situation.
Got it. Okay. I wanna turn to, you know, cost for a minute. Just, you know, in an environment where a lot of companies are talking about margin pressure, especially from rising wages and benefits. I mean, does the franchise component protect Snap-on somewhat from that pressure, in 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, you know, I assume that if you get wage pressure 'cause the price of beef goes up, the franchisees are gonna wanna make more profit. Therefore, they're gonna wanna charge more. I don't think. Part of it is, yes, the franchisee may feel the same margin pressure. That isn't an employee for us. Generally, we haven't felt that pressure. You know, our margins have been up pretty well. I think it was 21.5% in a quarter. That was the second highest ever in our time. Up 50 basis points over last year, up 360 basis points over pre-pandemic levels. I think that's been pretty strong. Our year's numbers were 20.9%, up 90 basis points over last year.
I think in this base, we've been able to do this. We see some pressures in terms of steel and so on. Steel's gone up and then down. Still not back to where it was at pre-pandemic levels, but we've been able to price for that. Part of that is, if you think about the franchisees have a couple of things. One is through them, we control the customer interface, so therefore, we can decide what the product is gonna be sold. We can't exactly decide, but we can have an influence about what the product can be sold for.
Mm-hmm.
Will be sold for. He's got 4,000 SKUs on his van. He's got a catalog of 40,000. He's got promotions that can be lean or rich, depending on how we have it. The pricing interface for the franchisee is fairly cloudy in the face of. Plus, he's got all these new products coming out all the time. Therefore, he's been able to, during this interlude, I think, raise his numbers. We believe the franchisees have never been more flush.
Mm.
In terms of their position. Their certainly sales are going up. We believe their equity is going up, and they seem to say so.
Right. 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 is, part of this is it doesn't mean that we don't have places where we'd like to hire more people.
Mm-hmm.
I don't see it more acutely than it might have been five years ago. You know what I mean? We have all these things. Part of it is we actually didn't lay off anybody in the...
Yeah.
I think part of the people are having trouble finding people is they got disenfranchised.
Mm-hmm.
I mean, I think that's one of the things. That tends to spread in a community that you're not laying off, and so therefore, people are kinda anxious to go work for you. That's worked okay for us. I'm not saying it isn't. There are places in the distribution centers and so on, where the turnover has always been higher, and it's still higher today.
Mm-hmm.
We generally don't see that as a limiting factor for us.
Got it. Okay. Well, I wanna make sure I give the audience time to get their questions in. I see one over here.
Very, very briefly, can you address the financing side of your business? I 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. It doesn't, it doesn't affect our actual cost of funds. Generally, our rates that we charge, you know, from jurisdiction to jurisdiction often are statutorily the highest because reflecting the subprime nature of our business. 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. I already said that generally if people buy our products, they finance with us, so there wasn't 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.
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 and losses during difficult times. I mean, it does move up sometime. In the Great Recession, ballpark numbers they may have risen, let's say, from $2.5-$3 to $3.5-$4 in terms of all-in loss, but generally 100 basis points on that kind of thing wasn't much for us. We tend to lose more on currency sometimes than that made a difference.
I think our credit company is fairly solid, and I think it's on you know, a local rise right now. Sure.
Great. oh, here we go. Great.
You talked about EVs and kind of the move to EVs. With fewer parts in an EV car, doesn't that mean that there are gonna be fewer tools? How does that really translate? I guess, you know, a company like Tesla, are you having as many tools that are needed to service a car like that?
Well, Tesla is one of our customers. We call on the Tesla garages. Remember that, in the United States, generally, the technicians own their own tools. In some ways, when I'm talking about calling on Tesla garages, we'd be selling them bigger stuff like lifts and so on. Seller technicians tools. Actually, we're not seeing that in the warranty rates and so on in the electric cars that are on the road today. I don't think that's gonna lead to that. On top of it'll lead to a whole set of other tools that, if nothing else, you don't wanna be poking around an electric car with a non-insulating tool, otherwise you'll fry yourself. That's gonna require a whole bunch of different tool sets if you're gonna work on those.
Right now, there aren't 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, that we're just on the verge of starting to see the drive associated with that. On top of it, you're gonna see all these other cars, like plug-in hybrids and internal combustion engines. I don't think we're seeing that right now, much of a difference, but the date is still early. There aren't that many on the road.
Thanks.
You mentioned one thing, just about FX and how, you know, at times you can lose more on FX than you do on, you know, on loss rates. Just curious if there's, you know, 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, you know, expansion opportunities globally?
The van business, the 40% of the business, only works where it is established where technicians own their own tools. 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, you know, the British apprentice system. The rest of the businesses are sold direct or through distributors to the in auto repair to the facilities themselves. The C&I business is again, a direct and distributor business. What you'll see in most jurisdictions of Europe, except the U.K., you'll see RS and I and C&I selling into all these critical sectors. RS and I will sell through distributors. RS and 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 this Automated Driver Assist Systems.
Mm-hmm.
One of the things about this is that this is driving a significant component of our business. You talked about electric cars. You talked about repairing the cars. One of the things we know now is we're seeing is the cars are all becoming a neural network of sensors.
Mm-hmm.
Anytime you have a small perturbation of the car, you need to recalibrate these sensors. For reasons that I am not surprised at, based on having worked in the auto companies, but generally everybody has their own system. 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 costs you to get it repaired, because it won't be cheap. Or get a crack in your windshield. You'll find out what I mean. 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.
Yeah. That verifies something that Driven Brands said right before this session was, you know, the same thing.
Yeah.
Like, you know, just all the increased complexity in parts of the vehicle that you wouldn't think of outside of the drivetrain and like, you know.
Well, actually, like I said-
The bumper. Yeah.
Like I said, today, a small number of parts or not, only 80% of repairs aren't on the drivetrain.
Right.
They're all stuff like, okay, at a BMW, if I change the battery, I gotta reprogram the alternator. We do that for you. By the way, if you remember that most of these cars are being serviced in independent garages. They're not being serviced in dealerships.
Mm-hmm.
They can't be serviced in dealerships because there are 17,000 rooftops in America. There are 250,000 independent repair shops.
Mm-hmm.
It's a physical impossibility for them to be serviced in those places. You know, if you live in Seneca Falls, New York, you're not gonna own a Toyota because the next Toyota dealership's too far away.
Great. I think that brings us to time. Thank you so much.
Okay. Thank you.
Appreciate it.
All right.