SWK Q3 2026 earnings call transcript, November 4, 2026

to the Stanley Black and Decker third quarter. quarter earnings call. My name is Shannon, and I'll be your operator for today's call. At this time, all participants are in a listening mode. Following the company's prepared remarks, we will conduct a Q&A session. To ask the question of the management team, please press star 11 on your phone at any time. You will hear an automated message advising you are in the queue. To withdraw yourself from the queue, please press star 11 again. Please note that this conference is being recorded. I will now turn the call over to the Vice President of Investor Relations. Michael Worley. Mr. Worley, you may begin. Good morning, everyone, and thanks for joining us for our third quarter earnings call. With us today are Chris Nelson, President and CEO, and Patrick Hallinan, Executive Vice President, CFO, and Chief Administrative Officer. This morning's earnings release and the supplemental presentation, which we will refer to, are available on the IR section of our website. A replay. of today's webcast will also be available at approximately 11 a.m. Eastern Time. Chris and Pat will review our third quarter results along with our updated outlook for 2026, followed by a Q&A session. During today's call, we will be making some forward-looking statements based on our current views. Such statements are based on assumptions of future events that may not prove to be accurate, and as such, they involve risk and uncertainty. It's therefore possible that actual results may differ materially.

from any forward-looking statements that we might make today. We direct you to the cautionary statements in the 8K that we filed with our press release and in our most recent 34 Act filings. Additionally, we will also discuss non-GAAP financial measures during the call. For applicable reconciliations to the related GAAP financial measures and additional information, please refer to the appendices in today's earnings release and supplemental presentation. I'll now turn the call over. to our president and CEO, Chris Nelson. Thank you, Michael, and thank you all for joining us today. Stanley Black & Decker delivered a strong third quarter with 4% organic growth, 39.4% adjusted gross margin, and strong cash generation. Overall, the quarter reflects solid execution across the company. From a strategic standpoint, we continue to see encouraging brand and industrial momentum. Our three core brands each delivered organic growth, reflecting the benefits of our focused investments in brand activation, innovation, and commercial execution. These results give us further confidence that our strategy is resonating in the marketplace and positioning the company for sustainable value creation. During the quarter, we also received a meaningful amount of IEPA tariff refunds, and we have now we have now. received the vast majority of what we have applied for. Those refunds, net of the related costs and investments, are reflected in our results and updated guidance that we will share with you today. It is important to note that even excluding the net benefit of tariff refunds, adjusted gross margin performance for the third quarter was strong and at the high end of our second half guidance range. Adjusted EBITDA of 16.3% was up.

400 basis points year over year. Adjusted earnings per share was $2.31, which was 76 cents above the midpoint of our guidance range. The tariff refund effect net of all related costs and reinvestments contributed 67 cents to the third quarter earnings per share. We also realized some benefit from the lower share count due to buybacks in the quarter, as well as low. Lower net interest expense. Regarding capital allocation, we repurchased more than 2.5 million shares for about $250 million in the quarter, fully utilizing the $500 million authorization that was approved by the Board of Directors in April. Given the third quarter performance, continued strength in execution, and the confidence we have in the business for the balance of the year, we are raising and tightening our full year EPS guidance. Pat will unpack the results and underlying guidance assumptions when he takes you through the financials in more detail. In addition to our operating performance, we also took two important actions over the past two months to strengthen our portfolio and capital allocation flexibility. In September, we announced a definitive agreement to sell Excel, the Hustler branded large format mower business, which is expected to further streamline our portfolio. and allow us to focus resources on the areas and brands where we see the best opportunities to grow and create value. Excel will remain in our results until the deal closes, which we expect around year-end.

Also, after the third quarter ended and at their meeting last week, the Board of Directors approved a new $1 billion share repurchase authorization. This new authorization extends our flexibility to return capital to shareholders. in a thoughtful, disciplined way while continuing to invest in the business and advance our strategic priorities. Together, these actions underscore our confidence in the outlook for the business and our commitment to balance shareholder-focused capital allocation. With that context, let me briefly review how the quarter played out across our segments. In Tools and Outdoor, third quarter revenue was approximately $3.3 billion, up 2% yield. Year-over-year. Organic revenue was up 4%, led by 7% volume growth, which was partially offset by three points of price. Total revenue growth was also impacted by two points related to the impact of the previously announced strategic transition to a licensing model for the gas walk-behind outdoor products. Currency was flat. We were encouraged by another quarter of organic growth for our priority brands, DeWalt, Stanley, and Craftsman. We are contributing to more sustainable, above-market growth across the portfolio. The volume strength was led by Power Tools, which saw continued momentum in both the U.S. retail channel and the commercial and industrial channel. We delivered another quarter of well-executed demand generation and market activation in U.S. retail. We maintained the promotional plan set in place for the third quarter, and the plan was well-received, supporting strong revenue performance.

in the channel that was up mid-single digits. Within the U.S. commercial and industrial channel, demand was even stronger than last quarter, with revenue up by a mid-teens percentage year over year. That performance reflects continued professional demand, as well as the benefits of our targeted growth investments, including expanding our field presence to support end users on the job site and serve customers more directly across the channel. Tools and outsource third-quarter adjusted segment margin was 17.6%, which was up 560 basis points year over year. Net tariff refunds contributed approximately 430 basis points, with the balance driven by net productivity gains and favorable product mix. Now for additional details on the third-quarter top-line performance by product line. PowerTools organic revenue increased by 10%, and hand tools, accessories, and storage organic revenue increased by 2%, which were both driven by strong market activation and global priority brand performance. Outdoor organic revenue declined 12%, as the season continued to be pressured by weather in the U.S. and ANZ, which remained a headwind for the quarter. From a regional perspective, North America organic revenue increased 6%, supported by strong mid-single-digit growth in retail and continued growth. continued sequential improvement in commercial and industrial. North America point-of-sale in aggregate was slightly ahead of reported home improvement consumer credit card data. In Europe, organic revenue increased 1%, with continued strength in Eastern Europe and Iberia, regions where we've strategically invested in sales resources to fortify our presence across channels. Growth in Europe was weighed down by a more chance.

challenge macro backdrop in France. Across the rest of the world, organic revenue declined 1%, driven by modestly softer performance in Latin America. Overall, we remain encouraged by the progress in tools and outdoor. The quarter reflected strong volumes, continued momentum in our core brands, and improving underlying profitability, reinforcing our confidence that our targeted investments are helping to position the business. For more durable, profitable growth over time. Turning to engineered fastening, revenue was down 21% year-over-year, primarily due to the aerospace fasteners divestiture completed earlier this year. On an organic basis, revenue increased 2%, driven by broad-based strength in our industrial business, which more than compensated for a soft automotive market. Adjusted segment profit margin was 11.5%. down 110 basis points year-over-year, largely driven by automotive demand pressure. This segment was not affected by tariff refunds for the quarter. In automotive, organic revenue declined 2% as OEM customers became more cautious on launches, production schedules, and capital deployment. In industrial, organic revenue increased by 10%, supported by project-driven wins, customer... momentum, and solid commercial execution. Overall, industrial demand remained solid, and our higher growth industrial verticals continued to perform well, helping offset the more challenging automotive backdrop. The progress we are making in both segments reflects the efforts of our teams around the world, who are executing with discipline in a dynamic environment. Our strategic priorities are delivering results, and we remain confident in both the direction of...

...the company and our ability to create long-term shareholder value. Having become a focused, brand-led organization, there are several dimensions to the work that we have been doing to fundamentally evolve how we operate. We have invested more to support our channel partners, to serve end-user categories where we see the greatest opportunity to activate each of our brands, deepen market penetration, and generate attractive returns. We have focused our... ...innovation process to methodically embed the platforming approach with the aim of accelerating innovation to solve end-user challenges. And we have strengthened our brand positioning to be present at the critical points along the end-user's path to purchase. We have done this by strategically positioning our brands in the market, thoughtfully supporting our brands in global channels, and serving end-users with innovative solutions. While each brand serves a distinct end-user... our approach to activating our brands is consistent. One, lean further into digital marketing, building brand campaigns that resonate with each brand's target audience. Two, use social media and influencer ecosystems to extend reach, relevance, and engagement. And three, and most importantly, pair this brand building and amplification with innovation, channel support, and in-field end-user engagement. Combining these things ensures the brand promise is well-supported and translates the end-user engagement into higher demand and organic growth. Ultimately, we are investing to drive durable organic growth across our priority brands.

The positive organic growth we generated across DeWalt, Stanley, and Craftsman over the last two quarters is early evidence that these targeted investments are gaining traction and translating into revenue. Starting with DeWalt, our focus is on deepening our connection with the professional end user. We are seeing strong penetration of new products that support our end-to-end workflow solutions across the trades, including products that deliver full-size 20-volt power in a compact profile that allows users to transition from pneumatic to cordless, along with a major expansion of cordless carpentry tools built with DeWalt. with industry-leading features to support the toughest job sites. One lever we are using to amplify DeWalt end-user engagement is our global No Quit campaign. The message behind this digital marketing effort is simple. DeWalt is one with the mindset of the professional, resilient, productivity-oriented, and committed to getting the job done right. We are bringing that to life through digital storytelling and direct job site relevance. On the back of that campaign, we are scaling brand activation around the pro user and leveraging industry influencers and targeted digital channels to meet professionals where they work, learn, discover, and make purchase decisions. DeWalt delivered organic growth across all regions with notably strong performance that outpaced the broader business and underscored the brand's momentum across markets and channels.

For us, that is a strong signal that our pro-focused brand investments are resonating, and we are continuing to deploy resources to build on this progress. Moving next to Stanley, this is an iconic, trusted brand with deep heritage, and our work is focused on modernizing the Stanley brand message, refreshing and sharpening the product story, and creating clearer reasons to choose Stanley. This includes enhancing how the brand shows up. Both in-store and online, and improving the clarity and consistency of the message. We are refreshing our offerings across tool categories and have completed two of eight waves of our product refresh initiative, with Wave 3 currently underway. We have also made targeted investments to add dedicated Stanley resources in the field to better serve our customers. We are seeing clear evidence that these investments are working, and we are... ...are continuing to invest behind that momentum. Stanley generated positive organic growth in each of the past two quarters. This progress reflects the combined impact of brand revitalization, product refresh, and stronger commercial execution. Shifting to craftsmen, we are laser-focused on the DIYers in North America, and we are meeting them throughout all parts of the DIY journey. From planning and researching to... ...savagating through the project to successful completion. We are supporting that with stronger digital storytelling, social engagement, and product-focused activation that helps consumers understand the value proposition of craftsmen. Our advanced V20 battery that launched earlier this year is quickly penetrating the market and supporting strong adoption across the breadth of the product ecosystem. New tool introductions and product...

refreshes across categories have been notable this year. In fact, we are launching the most new products this year since we first acquired the brand, and they have meaningfully contributed to the organic growth over the past few quarters and are supportive of our expectations for the balance of the year. Consistent with our approach to DeWalt and Stanley, our influencer partnerships and brand collaborations are helping end users connect with the Craftsman brand. We are seeing record engagement for the brand with performance exceeding industry averages across channels and our strategic retail partnerships continue to play an important role in building momentum. Our strong brand activation and new product introductions are beginning to translate into results. Taken together, these brand building and activation efforts are not standalone initiatives. They are part of our strategic imperative. And the broader operating framework we have been building to drive more consistent, profitable growth. Combined with innovation and the continued expansion of our field presence to better support end users on the job site and serve customers across our global channels, we are seeing early indicators that our investments are resonating in the market. I will now pass the call to Pat to provide more detail on performance in the quarter.

our 2026 guidance and share progress on a few key performance metrics. Thank you, Chris, and good morning to everyone joining us today. I will start by providing a bit more detail on our adjusted EPS and adjusted gross margin outperformance in the third quarter, and then turn to guidance. As Chris noted, third quarter adjusted EPS was $2.31, exceeding the midpoint of our July guidance range by $7. Above the line operating performance was largely in line with our expectations, with the outperformance primarily driven by the net tariff refund benefit plus contributions from lower share count and lower net interest expense. The net tariff impact in the quarter contributed approximately $0.67 of the outperformance. This net benefit reflects the tariff refunds we received during the third quarter, partially offset by targeted growth investments, higher incentive compensation, and taxes associated with those refunds. Importantly, a portion of the growth investments we already contemplated in our prior guidance as they were related to tariff refunds received during the second quarter. We continue to take a disciplined and returns-based approach to reinvesting a meaningful portion of these tariff refunds in brand health to support sustainable and profitable organic growth over the long term. Share of purchases in the quarter contributed approximately $0.02 to our EPS, and below-the-line items added another $0.02, predominantly due to lower-than-expected net interest expense helped by the strong operating cash flow throughout the quarter. Adjusted gross margin was 39.4% in the quarter, which included approximately 430 basis points of net tariff benefit. We note this was above the 35% threshold with or without

the benefit of net tariff refunds. Importantly, net productivity gains and favorable product mix were the leading factors driving the remaining 350 basis points of year-over-year improvement. This achievement reflects the structural progress we have made over the past year, as well as the favorable product mix in the quarter. Now, let me walk you through some of the key underlying assumptions embedded in our updated 2026 guidance. First, the temporary period of lower tariffs, which began in late February, has persisted and is still largely offsetting the increasing inflation in our 2026 forecast. We continue to expect overall tariff rates to increase to the former IEPA tariff levels. However, we assume this occurs very late in the year, having no material impact on our 2026 earnings. Inflationary headwinds have. grown over the past three months, particularly for steel and electrical components. Whether or not tariff levels rise to the former IEPA levels, we will have meaningful inflation to address in 2027. We plan to do so with productivity measures and pricing actions with a price increase likely around the turn of the year. Second, our 2026 adjusted EPS guidance includes a net impact of 60 cents resulting from tariff refunds. This includes the gross refunds received during the second and third quarters, along with the partially offsetting costs and taxes associated across the balance of the year.

Moving on to our 2026 guidance metrics. From an operational perspective, excluding the tariff refunds, our outlook for this year remains consistent with our prior expectations. However, we are raising and tightening our adjusted earnings per share forecast to be in the range of $5.95 to $6.25. The midpoint is $0.60 higher than the midpoint of our prior adjusted guidance range, and it represents 31% year-over-year growth. $0.55 of the guidance increase reflects the incremental net tariff refunds we received in the third quarter, including the partial offsets from related costs and taxes. A meaningful portion of the offsets related to the refunds already received are landing in the fourth quarter. The remaining $0.05 of our increased guidance reflects the reduced average share count as well as the below-the-line items, including lower net interest expense. Share repurchases completed in the third quarter are driving a reduction in weighted average shares to $150 million for the full year, 2026, versus... our prior estimate of $151 million. As a reminder, this updated EPS guidance does not contemplate any potential fourth quarter tariff refunds because the timing and amounts remain too uncertain to include. Further, we have received most of the IEPA tariff refunds for which the government has provided a refund pathway. Our revenue outlook is consistent with our prior guidance framework. Total company revenue will be about flat...

compared to last year, and organic revenue is still expected to grow by a low single-digit percentage year-over-year, driven by solid volume growth and roughly flat pricing for the full year. This outlook reflects our continued focus on pivoting to growth and our confidence in seizing the share opportunities across our key markets. Moving to gross margin expectations, we anticipate full-year gross margins will expand... ...by approximately 350 basis points year-over-year, inclusive of approximately 150 basis points from the net tariff refund benefit. The remainder of the gross margin expansion is primarily driven by underlying operational business improvements. We continue to have conviction in achieving 34% to 35% adjusted gross margin in the fourth quarter, and I will talk more about that on the next slide. We now... expect full-year SG&A as a percentage of sales to be around 23.5% to 24%, which includes about 80 basis points of incremental costs related to the tariff refunds received, including growth investments. Keep in mind, this allocation of refund dollars to growth investments will further advance our robust innovation pipeline and fuel market activation. With the goal of enhancing brand health and accelerating organic growth, we will continue to manage SG&A thoughtfully, allocating capital to strategic investments to drive sustainable growth and position the business for long-term value creation. These tariff refunds have clearly given us the rare opportunity to ramp up and pull forward certain growth investments into 2026. Our initial view on 2027 is that we can manage our SG&A levels back down to approximately 23%.

of sales as some exceptional items from this year roll off. Coming back to 2026, we are increasing our forecast for free cash flow by $400 million at the midpoint. We now expect to be in the range of $1 billion to $1.2 billion. This increased guidance incorporates both the stronger free cash flow generation we have seen year to date, as well as the tariff refunds received in the third quarter. Our free cash flow performance is supported by a disciplined approach to working capital management in light of our ongoing tariff mitigation, footprint optimization initiatives, and inflationary trends. Looking at our segments now, Tools and Outdoor is still expected to deliver low single-digit organic growth in 2026. Led by market share gains in what we anticipate will be roughly a flat to down market, we expect fourth quarter organic revenue to be up between 3% to 4%. fueled by the continuation of our strong and effective brand activation initiatives. On a full-year basis, adjusted segment margin is expected to improve year-over-year, driven primarily by productivity gains and tariff refunds. Engineered fastening is now expected to grow by a low single-digit percentage organically, due primarily to the recent deterioration of the auto market. The industrial portion of this business is expected to remain more resilient. Adjusted segment margin is now expected to be flat year-over-year, due to increasing material inflation and auto volume softness.

While we expect auto to continue to be soft during 4Q, we are working to manage this without it impacting overall company earnings. Turning to other 2026 assumptions, our pre-tax, non-GAAP adjustments are expected to be in the range of $0 to $20 million, which consists primarily of charges related to footprint actions, partially offset by the second quarter CAM gain. The approximate $0.40 to $0.50 difference between our GAAP EPS and adjusted EPS ranges is explained by these adjustments, as well as the related tax impact on the CAM gain. Our full-year net interest expense is now expected to be about $250 million, which is improved from lower debt levels and strong free cash flow. performance year to date. We still expect other net expenses to be around $230 million. We now expect the adjusted tax rate to be 20% for the full year, up from 19% in our prior guidance, reflecting a higher portion of our net earnings in the U.S. due to the tariff refunds. Now for the balance of the year. Our views on fourth quarter underlying operational performance have not changed materially. Since July, we anticipate net sales to be around $3.6 billion flat overall due to the cam divestiture and transition of gas walk behind mowers to a licensing model. On an organic basis, we expect sales to be up by two to four percent for the total company. Adjusted earnings per share are expected to be approximately $1.45, which includes roughly 25 cents worth of.

Incremental costs and taxes directly related to the tariff refunds received already. Our adjusted EPS for the quarter assumes a planned tax rate of approximately 17 percent and a share count of about $148 million. Turning to slide eight, our path forward on margin expansion and capital deployment remains consistent with that outlined in July. As we look to the fourth quarter, we continue to have conviction in adjusted gross margin reaching the 34% to 35% range, consistent with our operational expectations. The improvement is expected to be driven by productivity and tariff mitigation initiatives. Our third quarter adjusted gross margin performance, even excluding the net tariff refund benefit, reinforces our confidence in our ability to continue driving year-over-year profitability gains in future periods. We continue to target long-term adjusted gross margins above 35% towards 37%. Free cash flow outperformed in the third quarter, and it is approximately $836 million year-to-date, which included positive contributions from both operational cash flows as well as tariff refunds in the quarter. On capital deployment, we executed $250 million of sharer purchases during the third quarter, completing our prior authorization of $500 million. This reflects our continued commitment to thoughtful capital deployment, including returning capital to shareholders. The board's new authorization of $1 billion reinforces our focus on proactive, thoughtful capital allocation. We remain on track for net debt to adjusted EBITDA to be at or around two and a half times at year end. We remain committed to disciplined capital allocation and accelerating value creation for shareholders, including funding organic growth,

returning capital to shareholders efficiently, and considering bolt-on M&A when appropriate. All the while, we plan to maintain an investment-grade credit rating. The pending sale of Excel that Chris mentioned is also an example of how we are continuing to prune our portfolio to focus on the core assets we believe can drive sustainable and profitable growth. With our sharpened portfolio, disciplined cost and capital allocation, and a relentless focus on our customers, we have the foundation in place to respond to market dynamics, deliver growth, and create long-term value for our shareholders. Thank you. I will now turn the call back to Chris.

Thank you, Pat. Before we open the call for questions, I want to thank our teams around the world for their relentless focus and disciplined execution in what continues to be a dynamic economic environment. We remain firmly focused on the actions within our control. driving operational excellence, accelerating innovation through our platforming approach, and investing behind our brands so we can better serve end users, strengthen demand, and improve the long-term earnings power of the company. That mindset is central to how we operate with discipline, urgency, and a clear focus on advancing our self-help journey. With the progress we are making, the strength of our team, and the clear conviction of our team, we are confident in our strategy, optimistic about the opportunities ahead, and believe Stanley Black & Decker is increasingly well-positioned to deliver stronger, long-term shareholder value. We are now ready for Q&A, Michael.

Thanks, Chris. Operator, we can now start the Q&A. Thank you. As a reminder, to ask a question, please press star 11 and you will hear an automated message advised.

and you are in the queue. To withdraw yourself from the queue, please press star 11 again. We ask that you limit yourself to one question and we will leave the mic open for a follow-up question if you have one. You can re-enter the queue if you have more than two questions. We will now compile the Q&A roster. Our first question comes from the line of Nigel Coe with Wolf Research. Your line is now open.

Hey, Nigel. This is Chris. Great hearing from you. Thanks for the question. As it pertains to your first part of the question, which is the pricing in Q3, what I'd say is we're absolutely on plan where we want to be. Our list prices are where we put them as we raise price as a result of the... tariffs coming out of last year. And if you recall, in Q4 and Q1, we talked about resetting our promotional calendar and approach to be more targeted to driving higher margin opportunities and readjusting as we came out of that very disruptive cycle. We have not changed that plan one bit coming out of Q1, and actually we're executing... right on the plan. What has happened is that we've had tremendous success with the plan, and you can see that showing up in the volume for power tools, as well as the accretive margins and the margin expansion and levels being at the higher end of our range. So we feel very good where we are on price. I think the next thing is, as we head into 2027, what my comment... there would be is that our commitment and our role in leading this organization is that we have to continue to expand margins in any environment. It's vital to our journey in order to be able to support our end users with increasing levels of innovation in each of our core brands. And as such, we've continued along all of the productivity along the way that helps... offset some of that inflation. But as we go into next year, clearly some of the inflation we're seeing in areas such as metals and resins affect everyone and are kind of immune to some of the productivity measures that we can normally take. And we will be looking to supplement our productivity with price as we come out of the year. I feel like the areas that we are going to be taking price are...

are common across the industry. And therefore, I think it's going to be that type of environment. That being said, I think that over the past number of quarters and months, we have learned a lot as we've gone through these pricing exercises. And we're going to be very thoughtful in working with our channel partners in order to make sure that we're putting the price in the areas most affected as well as in the categories and SKUs that we... understand have the greatest level of differentiation and favorable elasticity. So we feel well positioned and it's something that we've been spending a lot of time over the past number of months getting prepared for as we exit the year. That's great. That's a great answer. And then just a quick one on the portfolio actions, you know, with the moves you made in the outdoor tools group. You know, the... the licensing model for the walk behind the sale of Excel. Where do we stand right now on potential portfolio actions going forward? Yeah, I'd say that we're, you know, we're kind of at the, you know, we're at the end of the major transformational cycle that we're in. And, you know, certainly there could be pruning opportunities, but they'd be more around the edges, you know, with particular product lines or categories. If anything, but there's nothing on the docket as we see it right now, but we'll continue to challenge ourselves because our job is to make sure that we are allocating our resources and concentrating our efforts in the areas that we see the highest growth potential going forward, not only from a brand, but a category perspective.

And as it pertains to our outdoor business, we really like that business and we feel that this latest evolution allows us the appropriate level of. representation in that end market with great brands. We like the Cub Cadet brand and we feel that our presence in the market as it relates to large format ride-on mowers is well represented. We like that brand and we like the innovation that it brings with it. And then with what we're doing on handheld, particularly with the DeWalt and Craftsman brands, we feel like. We're well positioned and well, our portfolio and outdoor is well constructed at this point.

Thank you. Our next question comes from the line of Tim Woj with Baird. Your line is now open.

Correct. I mean, I think when you look at investments that are isolated from tax or compensation effects, you're talking on the full year from tariffs somewhere in the 70 to 80 million. And that's, you know, very much kind of in the range of the investment we would have had last, you know, for next year for 2027. You know, we're typically adding somewhere in the 75 to 100 million dollars of SG&A investment. So in essence, what tariffs have allowed us to do this year is pull that investment forward into this year. I would expect next year. Then, you know, we, as we said in the prepared remarks, be managing SG&A as a percentage of sales back down towards 23. So, you know, largely carrying forward the investment we put into this year because we pulled it forward into this year. And obviously our teams may adjust the mix of that investment next year, depending on the results they're seeing or the priorities they have. But I would consider. The tariffs have provided a pull forward of what would have been the 27 investment.

Thank you. Our next question comes from the line of Jonathan Matuszewski with Jeffries. Your line is now open.

So, it's an important part of the equation. Helpful. And then just to follow up, you know, you've hit on a couple of times now, obviously, 2026 being a record year in terms of new product launches for craftsmen. Can you talk about kind of what's enabling that, you know, whether it is kind of the platforming, obviously, and related to that, is this a new? To base, to anticipate in terms of kind of new product launches going forward that's been enabled by kind of changes within kind of the brand's organization? Thanks so much. Yeah, this is a great question. I would say that the first thing that's really driven a lot of what you're seeing in the activity in the Craftsman brand is focus. You know, not only a focus on the brand, that it's one of the core brands that we see. is having great potential that we want to invest in and grow. But focus from the definition of what type of end user and what types of products we should be then, as a result, developing. And then we have that focus, then it goes into how are we going to make that happen and how are we going to make it happen quickly. And we have been able to really leverage our platforming approach to drive speed in making sure that we are able to deliver those products that are the most relevant for that DIY North American end user in those categories at the right performance point. And getting those out the doors, we've really focused on building out our V20 platform as well. So it's really, you know, I'd say that it starts with focus and then the execution has been enabled by our platforming approach for speed.

Thank you. As a reminder to ask a question at this time, please press star 1-1 on your touchtone telephone. Our next question comes from the line of David McGregor with Longbow Research. Your line is now open.

Got it. Okay, thanks for that. And then just to follow up, can you just talk about the progress you're making in the CNI channel? Some big numbers this quarter, and how do you see the long-term growth potential in that channel? Yeah, so in the CNI channel, I think part of it is a reflection of the fact that that really underlies the strength of that end user. So the professional end user, specifically the end user that is involved in large commercial construction and infrastructure projects, they're utilizing that channel. So it is a strong and continues to be a robust segment of the business is kind of conversation I'd have there. And then our success, which has been, we think above market, is a reflection of the strength of our value proposition with the DeWalt brand. And if you rewind the clock back three years, we started with the DeWalt brand and how we were going to make our investments for growth. Both there in the way we were developing our tools to make sure that we had more solutions for the trades from an end-to-end workflow perspective, as well as making sure that we were investing in our resources in the field to help activate those brands and work with our end users and channel partners in what we saw as a robust market that we saw would be strengthening as well. So I think it's a combination of a very... a strong underlying market and then our performance in the market and consistency in our approach in investing in that brand and in that channel that is coming together to drive some nice results. And, you know, we do see continued strength in that channel.

Thank you. And I'm currently showing no further questions at this time. I'd now like to hand the call back over to Michael Worley for closing remarks.

I see one question. That just popped up. Can you take the question from Sam, please? Sure. Our next question comes from the line of Sam Reed with Wells Fargo. Your line is now open. Awesome. Thanks so much, everyone, for taking my question. It's great to hear the optimism around, you know, 2027, you know, around perhaps price costs. I'm just curious, though, you know, just put a finer point on how much of that is potentially dependent upon, you know, peers taking price.

I believe it is a lower gross margin business. Similarly, that will help you next year. But any finer points on that margin bridge would be great. Yeah, I mean, that's like a super small fractionally beneficial mix dynamic to next year. You know, Hustler is about, you know, 400-ish million of, 800-ish million of, 300-ish million of revenue. Sorry, correcting me. So in the scheme of our, you know, 15 billion. Plus revenue, it ends up being a really small mix dynamic overall in the year.

Okay. We'd like to thank everyone again for their time and participation on today's call. If you have any further questions, please reach out to the IR team directly. Have a good day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.