FAST - Earnings call transcript Q1 2021

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Operator

Greetings. And welcome to the Fastenal Company’s 2021 First Quarter Earnings Results Conference. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. pleasure your my Ms. now is to host introduce It Ellen Fastenal. Stolts of you. Thank ahead. go Please

Ellen Stolts

of Fastenal our Executive questions-and-answers. quarterly Company Welcome Chief website up be one Central overview and call Florness, without Today’s This to replay Financial A general distribution hosted Fastenal. with a until hour and midnight reproduction, and Fastenal call XXXX Time. Dan Internet open quarter the for operations, the conference call will the webcast with Investor to Fastenal the Quarter. permitted available first is at The of earnings the on time audio-simulcast or consent. last Fastenal’s Lewis, and the the June No Relations’ be Officer; is proprietary Holden being conference results presentation being call call. homepage, of remainder by and our President transmission XXXX is our the is by investor.fastenal.com. being call start Chief for X, of will will will This today’s recorded on recording, via

the company’s like encourage call As and factors a Exchange release those cause no to are and turn you would them. results These Factors company’s earnings that contained actual differ Dan is latest to results I conference Mr. now materially those reminder, on review actual in periodic anticipated differ carefully. statements we from to could we Florness. over based prospects. and the current the important filings anticipated. our from and and Commission, Securities expectations to statements note with duty company’s future are to may that the regarding undertake include the today’s update to plans It call results may

Dan Florness

of -- joining I week Thank QX will for -- if Annual I have our If three call. weekend, go and great you earnings into the morning were take morning, Annual go $X.XX page our for sales of an up story much you a assured, us will Net on earnings next good story per not our and get X.X% a a I flipbook, Meeting I well, as three diluted to this -- from that they too. so of If tell satisfaction, share basis, of everybody. earnings to but you, flipbook, most in were Saturday I participate and X.X%. you we thank too because or we daily quarter. up quarter, tell and X.X%. were will our to our increase right And people’s Ellen, Meeting will the a rest in the page

have here life, most that like month, have might payroll like out missed. the like expenses our rent for think period storms and of of of do less despite the I that. we that, deal the and million is so though impacts time larger numbers. whether in we of but one has Most stand storm, day, things XX, than big was had and that fact winter Some of much seem It things February one or on most our massive impact seen storms not and expenses day it’s we the the we that day. And day when more had quarter, scheme storms believe. our less center a a or we they it a still center than on that fact versus $XX are but in about meaningful Probably XX the calendar the a past, obviously, and years in I this me we

quarter is and to a anomaly. two only a of assume that. sure I That’s million about impact. XXXX are lose with just is $X flow would to because have day, the days, in that expenses weird But has can in and to out one year. the very the to point lost that of I in $X we a similar doing so We manage to environment. one the out if very QX aware our and quarter a to that business make that the $X So $X.XX I impressed bottomline. to business $X.XX million meaningful what in fourth, point team and first grow this impact

worth wrote X-ply down we masks. item in Additional about million of the quarter, $X

masks line a product X-ply historically Fastenal. we much is Now or product not sell a within

XXXX, from of we April to sold of As X-ply XXXX million release, masks. Holden $XXX of in roughly March worth mentioned the

So last to to as the a were it out spring in did And the a supply it. thing also was we pandemic. we locked That’s But months. of customers, do-over, for it do marketplace about in again. X% up dollars inventory. buy the a over partner went XX last we We our society quite being it what is We position, would spend willing strong and was of frankly, into sign chain felt a of sizable right And I’d and our supply. we going amount for well. had to the was sales a felt risky I knew quite do a employees, serve our it venture if

great decision. a was it think I

about things and I to think we do customers Our of to customers our type it to supply environment. potential are a also like we and a that in great But did willing this chain team as are what job. demonstrated partner

also And I of adjusted I out have have all the requires with Uhlman say gross to really the the did we was anything, team. the to sent reports morning, Manthey’s. prioritization a I not report we so the chuckled not impressed have I Adam million. it, Dave think, this to So $X margin, operational the earlier handle and impact I number morning. I do he It he am reading through, to of it really and where to on Manthey while had commented, FAST core explain three we out does financial kick it. capability three, have capability earlier of believe this bullet and Dave do out only sense went it

are correct. adjusted report We not You anything. do

We are not acquisitive company. an

a and We manufacturer are that’s leveraging EBITDA. talking not about

one the a of don’t really write-down -- great We I and Because I we our and economy we forward. in am talk the have bullish is growth. masks our of as the market FAST daily of is done still The see us you think what and is I is write-down believe that’s proud that we one should distributor. with believe to in the most It’s it comments doing bullish distributors And going most showing inventory. also externally. we inventory position be about think we going make are months healing positions -- come. next Because bullet, the of when as change the for of internally in in inventory. an organization, could and how our up, to

in So we X% in grew was the about March. first it but XX% quarter

That Now too a about as comp that issue a of number. before get bit is you excited well.

think I So sequential to story. more lot tell has a the

back back fasteners March, and about. a fasteners was years X.X%. on to our saw before what decade the to it’s January we like XXXX in I XXXX, go -- grew to XXXX, the to the grew what sequentially that, see in changing, led go we sequential the strength economy If our ago we our the sequential ignore manufacturing, XXXX, and markets. average, write-down grew our that’s -- sign a us sequential in because good of very X.X%. and we market heavy manufacturing patterns masks, That’s end in particularly saw Just

cockeyed that a release don’t the five a six I ship very North in think we the almost increasing -- chain come days. planet, mentioned that where That’s to suspect around we seeing days saw live also regardless visual as in for the of five surprise Canal America. I in anybody. supply Suez pressure. everybody I merely that you thing We are should ports that seeing days, on are about sitting think

We into to seeing around thing the inflationary we and activity lot impact a world that create are seeing do rising and move QX anticipate and as quarter, there’s in and constraint. seeing we are a we that. one constraint Pretty QX. ports first pressures the larger is nominal impact And of and

the XXXX, in regional quarter. a very four, our quarter last with of wonderful XX leadership, pre-pandemic We a local and on the result, job X,XXX page to signings, X% our pandemic we and our in in flow did we teams, that’s and of increase are highest much signed working active managing Again, very, whether back finance we strong we while number year. Holden Flipping area, district in business. team, daily our sites, not the the Onsites an over ended environment Onsites improvement we say began. in improving. saw grew and Onsites that performance. a of team, XXXX only momentum we be As a its as continued saw cash the capital function to bit, the of sluggish and signings since the The that has opportunity the the and if in soften piece But sales through will, are quarter. is base, level that’s about see did older but that the current single which and improving the to is the is, more in long-term our the really A, of underlying customer still a as in, quarter signings mid-to-high nothing you went we of this of operate also of business reflection that’s digits signings, problematic

very I a new excited some the the that hopefully, him about you you detail. gotten in of have that are have Holden We reporting will let and FMI, adjusted business. into dig Onsite more to little -- has,

in nice did it job I the think a he release. explaining

job I annual in think nice our he did a it report. explaining

ago vending of much pieces a team a has year of has beyond additional our acquisition moved Apex business. being swath FMI the built, the strictly with Technologies With wider that to and

environment customer’s last thing really to surprised customers more with probably your are continue requires employees. excited wanted that. anything of even in months safe One signing strong is of your about kind keep at willingness It me you up -- FMI the engagement level lower Onsite, into vending lock XX in continue going the the facilities. where to also it for the Like and We an requires customer. of Onsites, that a facility signing

more facilities time vending and to welcomed replenish day. the each into We line have up to replenish been quarter. we e-commerce, more in -- that to and seeing Flipping bins, to XX% sales during have e-commerce this open every are rose entire frame, customer’s and we stocking, been daily replenish

EDI XX%. XX% With switch that, will web up our Our sales and was Holden. to I it over large were almost customer-oriented up

Holden Lewis

traditional our storms were the Dan. reduced quarter XXX the XXXX. five you, The customers. improved first the by of sales X.X% to of X.X%, and up February quarter affected Thank in total flipbook, basis severe growth Great. and daily points and Demand XX Starting for construction manufacturing U.S. the points. on that respectively, slide in in basis

of For great in improved but instance, Fasteners XX.X% in accelerated the typical between manufacturing safety to vended activity, and quarter was as manufacturing March. quarter, to Dan first similar up down up products saw bellwether rate March. in of total are heavy January and the XXXX flat in change March pattern. well a X.X% and X.X% and We in the but exceeded is industries. patterns Construction the first noted, of

so, March, So, at clear well. even yes, but as is comparisons improving growth underlying accelerating began that an demand to ease pace in it’s

the COVID-related up traditional slowed XXXX, sales in of in our up XX.X% moderating X.X% of March. were products quarter Now to that in Daily demand first business products. gains counterbalance the but is safety for

up slowed had over gloves, respirators ease which We in sales quarter that customers of sales past the have were XX.X% second surge quarter the the were few the XX.X% given but will heavily first months. This that in sales pronounced last second seen and more up quarter pattern pandemic-oriented daily XXXX, of become year. XXXX, government in Daily the we non-vended to March. absence of in of

area restrained primary first for the that earlier. continued is us from changed. by long-term more market year buy that goal, as those us first than pandemic. the second the during COVID-related $XX receptivity us Along time the our sales. last for to driver retain customers bought not lines, first Dan accommodations, is believe XX% growth customers from has signings, in who time quarter still however, in do quarter, are Our million to the The being We growth contributing discussed engaged in PPE drivers to of the with

When to it XXXX, the flat As the quarter, of we signings facilities as first see we well. at improve to will to decision second continues slightly activity access makers key did as believe growth we in and that quarterly down. quarter is look

As forward do you traditionally know, we provide guidance. not

the and comparison in our of However, in of $XXX absence million we gains given unusual just share some surge accelerating on traditional felt an demand would be the markets, perspective in $XXX convergence safety useful. to million sales,

XX.X% first mix six. and XXX XXXX. the basis remainder of quarter margin to in write-down of the customer The Roughly safety. quarter of fasteners in first was slide related over to points this addressed down Gross lower earlier. Now decline is margins between XXXX, product mask and the versus split half

For fasteners, to margin OEMs categories, growing other continue. lower which than likely is faster

related pressure large customer safety, government and carry However, implementations of supply from margins. ease buys to meaningful in manage XXXX. lower third spot couple and the second remain and a tight of the to In quarters chains to PPE sales should

basis in an non-government XXX margin quarter improvement flat of first margin producing lower, to of quarter of with prior margin remain year. the on points the mix product benefit The gross upcoming overall decline While XXXX the in in should operating the likely matched the leverage, the was in relative this XX.X%, by quarters business SG&A may margin. first

it have and branch spend reduction This of continues first Excluding travel of to lower leveraged discretionary expenses selling of supplies. leverage transportation reductions, in control nicely the related as of quarter write-down, the headcount, good a would and function XXXX. such be

but incremental of costs the continue. would quarter we margin was excluding write-down in first XX%. managed organization will the and roughly that believe been have XX%, Our XXXX The effectively

improving, in period likely time, measures. will that the which affected have cost comparisons second business. the same incremental However, demand and of the pandemic remember will anniversary as XXXX, to savings we been is investment get the quarter bring related the by the At tougher to first

quarter margin As incremental a moderate XX%, EPS of $X.XX, to we first first of result, XXXX. XXXX Putting incremental margins future quarters. X.X% to the would all it adjusted relative we quarter $X.XX of expect up in in together, from the reported

will slide down quarter X%. net million to accounts flow of Sequentially, seven. and XXXX efficient. the the was our receivables was is income. capital working were This while first in our product slow of turning historically due more logistics, initiatives these to and branch inventory make $XXX improvements Year-over-year capital flow improving up X.X%, of local receivable We cash to part count slowly is represent internal sustained. than believe reduce Now in Operating expanded quality, lower XXX% of our moving working in inventories that be improve more typical.

inventory from was global the the This first from signings largely tightening million in capital $XX which spend, contributed past Net less we in of to product device first hubs on from had our $XX vending about million quarter acquisition. the the better than XXXX hand XXXX. supply quarter However, -- months the Apex $XX stemming and which costs a spending intended. welcome was chains, was having was less app from in XX of of down lower lower over asset million,

And cash of in we unchanged finished dividends. a from We capital, Our the our available of the to from million year the XXXX. returned between XXXX million. at shareholders X.X% quarter standpoint, the spending first net capital form versus is of in with in for quarter range $XXX $XXX X.X% of $XXX to million remains debt XXXX fourth down X.X% revolver and total ago net in period use. all Essentially the of quarter liquidity

before interest. I of couple Now current address wanted Q&A, moving subjects to a into of

have a Price immaterial. and margin XX cost and points inflation, material growth not costs. did impact price the of This first we First, contributed material on basis significant particularly of on fuel basis for XXXX. transportation experiencing the points quarter steel, are was cost to to impact XX

pricing like quarter busy prices and higher likely we year. that second material XXXX of lift Further, throughout of environment processes actions receptive. we never they of supply the never The the in increases have seeing been developed, over contribution has broad and tools customers the Customers course course, in will but are are data pricing However, the instituting our today the chain. including for is effective. more

chains. global tightening domestic also and we by impacted are supply Second,

side, customers not sales the of operating fully On could they due are to components. shortage be as of as certain our

product cost our made lead allowed in These that been have has costly lengthened, spot and field moving overcome shortages with causing shortages in times the hubs. become and have the On service product buys side, increasingly dynamic experiencing us intensely margins. not through we That quite this We presentation. to all is believe the sustain as XXXX, service lower in could currently. perhaps our formal second half at as but though have persist are for

that, with Operator, take So we questions. will

Dan Florness

We other have one comment.

Before with I numbers to shared we quarters, employee these wanted our COVID switch In and I Q&A. of run with have over the I last neglected you. that mention just to earlier through and couple to you

low Fastenal X,XXX COVID. So roughly a Blue of of With Team had employees, cases our of look XX,XXX a the the office. just their number we at that that X.X% have work that’s since of when employees I out the have contracted you luxury within the start COVID-XX, home organizations, in our employees family. able over didn’t to consider being many fact unlike or room basement

had happening bullish drop a sign contrast, XXXX, as per had distribution Our us and to March a of peak XXX are out customers of engaged day manufacturing XXXX. and in was give work XX they cases week, with at or marketplace or a of so facility, We look location into If look XX center, and a XXXX. a we peak, the in Onsite XX%. the period every truck a underlying To XXX go I drive or week. actively think their of cases a in We we in branch that in or work our November you roughly work what’s environment. per is employees makes

We Q&A over to will switch please. now,

Operator

from go Research. Jake coming first Levinson [Operator Please Thank you. Our is ahead. of today Instructions] question Melius

Jake Levinson

everyone. Good morning,

Dan Florness

Good morning.

Holden Lewis

Good morning.

Jake Levinson

the give can looks pricing us know, broadly? pricing you -- you what of a little Holden, And you what the but bit a maybe expecting like either the are for more to put I or touched quarters next the just quarter, a year? point sense you in finer can on of if on wanted Just environment couple

Holden Lewis

I environment in costs around Yeah. the are where was mean, transportation. increase it an described we think, you simply seeing an way I

You are seeing in it steel.

You are in goes it plastics. seeing ultimately that fuel through and

of surprise in going I to we to we also that that surprise that and number that think, I I suspect seeing that behavior. inflationary It are react to ways, doesn’t anybody, are a but a going shouldn’t an part believe, is So, general, environment pricing involve of anybody.

in increases to as to we of the means price a quarter, things. have institute so are second some going And mitigating

So basis XX XX higher points price when I the I quarter, year. talked second do the to about from the basis in into we as of points impact to expect this that half of first get be

I stay Now normal will the same. of guess we will of and is to even is take I now order on objectives is don’t within order today. it be given be. that, are obviously, the news, goals. to our No. in our think remain our marketplace impact that our market let right customers the have neutralize range? that the good do X% I those it’s And think think essentially news that outside busy. are it of I really it think the our But margin to call X% us anything where and of that will actions, to sort I don’t the and maybe magnitude

that happens -- of thing But to always marketplace supply piece is This marketplace the could environment so terms chains environment unusual inevitably the not lot inflation. within actions seeing start they better than places customers if and the different a these experienced through have in think in of types there’s and a other manage we different seeing are are or a and I we wondering quarters get we periods to there’s price of able in the anything that that’s an of and an these customers conversation. past, from during be expect inflationary kind of for in Our it. where

Jake Levinson

are thinking just chain color. supply to you pretty if as or and well-publicized bumps, But guys you is through follow-up capital, about a that working there -- anything I will? out helpful inventory how like And has maybe carrying it extra you there’s are kind there. know, Thanks. manage That’s obviously buffer challenges of the changed Yeah. some speed

Dan Florness

because into is the be say into we expected hubs bit quarter. know the we that versus as simply If from as here’s $XX could that. move it couldn’t probably about to where And our I’d more maybe was what were quickly You accelerate. little the million, began demand light for have what, reason product going a we hubs in -- we to would

I not a the of, one carrying through whatever loud the we the them a survey the at disruptions No. of when say not inventory? And we bunch lot sure that comments first bunch are so to am time RVPs, we wouldn’t cases. that inventory. of out able carrying they we always getting upon buffer a But make and hub certain because are send the field chain that been out is, in what of the to have and it’s about are haven’t there’s of the And is have been to buffer where question I decisions. product. to we impressive individuals happening the independent product business sort level, this units in customer source of channel. provide out supply is is, go our in very inventory came aren’t I clear our And think not empowered what does to culturally, I called it buffer of

are I but so navigate of and structured organization we of the product the with in are continuing it we unique it and to of a that’s the We that’s the does terms keep effort to But time to in manage out one source that it. product. I managing more chain sourcing But field tightness supply uniquely is are think lot think and to involve strengths things. and not there, locally up Fastenal

I it of isn’t time. a a think, and But QX I the to within a we year, -- think as our gains mean, sourcing some sourcing you normalize I right? chain you over good as think we line. and share that’s moderate. effect in impact, does go saw for It saw that quite the of see in in can, that bit you terms supply as little will I outside fastener the supply profitable chain margin through market as we that have extent of the

Holden Lewis

will this environments just -- I of historically, as financial like think when have is I I many add you that and comment know, of I background. a a

that So being organization at months an network inventory hand of and operate. of how on our has we because

expensive also While to an resilient incredibly way it’s an operate, operate. to it’s way

I think that shined through in XXXX.

I think and shelf. that a in has supply chain. on on the the really bit shined because through in some little What allows when seeing do to more bit in even we we our team going pinging points Historically, doing, there’s XX the mentioned It What years changes own chain might are have a us are video. our past little inventory chaos going of XXX be we chain it agile an out. are supply on out with reorder days I to our are supply employees out, be out, further. that teams XXX is internal branches days days

hey, now to for might queue its paying because is this We might being to be us some that things into September for helped in product. incredibly to in known We saying, responsive are has queue there out that disruptions. an are in bills. August organization some want to the in we motion industry for we for and thing historically being product, and want it and pinging are folks now, are get order we do want now. going We One

we have I opportunities of local marketplace have told, else cash us tips opposed take the on to it its a strong more some that market national abilities a We move than have like won’t. Fastenal in and talking this. a has scale position. the that positions a result to competitors to can as of to and being history some anybody will lot well. believe towards will share, the in And competitors players. bit because I we ability faster am primarily We move about as environments inventory, our of And

Jake Levinson

That’s you, I helpful. it pass Thank will guys. on.

Dan Florness

you. Thank

Operator

Thank you.

question Chris of ahead. next UBS. Please coming is Our from go Snyder

Chris Snyder

starting write-downs PPE so inventory gross this Thank you additional help and margin in with is past QX, as frame maybe decks, or clear could the of about a you Does there you. guess million that? I trajectory $X speak how the to the risk just you think move write-down. then,

Holden Lewis

it’s that The when It only decks. is, is clear doesn’t product the No. and just and still the it was that’s a the difference we value to than market is today of market it good still moving. purchased it The dynamics. in relative fact it’s lower about

full write-off that appropriate or frankly So a have necessary. wouldn’t been of

probably that’s characterize I’d how that. So

Dan Florness

sell now the of is, in would went from add that thing aren’t like Only to and other more kind this where the are was products mask masks unique have I -- can bought were and that we marketplace. for a that supply and X-ply it item out easily us. standpoint, priced There where so that we have

inventory it motivated teams we local spend and sell itself we a and to to are grow could inventory and it lot have profitably business to of time Our expensive trying their that turn. grow if that want

Holden Lewis

the mean, your a shelf product the part, the So is write-down? the on I that’s was, remaining another we XX-month XX good product period. for and that, is shelves that I course of is will be able next on over of expectation to the our question think there risk sell in months what’s

Chris Snyder

the chain up on then, on that. disruption. supply comments guess, following I Appreciate And

you a the supply delays -- If to Are current dynamic with biggest customers the the leaning market share ‘XX and on chain with suppliers. the pretty you seeing port look QX disruption, similar in material Fastenal their took seemingly back whatnot?

Holden Lewis

whereas issues to intense, million order issues, occurred you I last the of and pricing Well, on million mill supply year of issues, chain right? those we $XXX would are within to I I of run going So, see think magnitude, the more that there. are that what generally do is $XXX was say potential distribution sort think that of mean, historically, unique an the our sales a supply moment about that to find you may fill be ability going I field in Nothing what, that current to environment? that chain product to wouldn’t out our sort. independently of in Dan is as But in we this perhaps of people gaps and to ago, have a and No. tight. go talked traditional able have little back otherwise the

a I think about. lot advantage It element Dan an to things that, last that, there a mean, the year, is that like as and customers of I to talked an was business. that. that was we our source advantage local

up advantage our right and now flexibility is I just the it an and model. this our demand in a available business our in concerned about be are think as will year what goes because customers having product

going that’s provide as us to levels high time. going so, intense expect sure what to at share. But anything year that think when think it’s remains service wouldn’t saw that market you an last advantage us I high, I availability this and give I remain making

Chris Snyder

I appreciate that.

Dan Florness

you. Thank

Operator

you. Thank

Baird. go Our Manthey W. next from David is of question coming Robert Please ahead.

David Manthey

Hi. Good morning, guys.

Dan Florness

Hi, Dave.

Holden Lewis

Good morning.

David Manthey

pre-pandemic or XXXX, floor would cyclical mix. does mix So, be how running then XX%, the -- the stuff bottoms mix from the the believe it safety am of cause was percentage incremental XX% just bottom in and that glide resuming products reasonable to personal XX% so? the say, I from where sort I path out, second in, to uptick about about I your secular and XX% the to and XX%, of expect recovery first closer shop half safety there off, are pandemic wondering thinking protection you or

Dan Florness

that thing, customers, it see would continue things safety customers to that going Dave, And now surprised a are there’s of lot This of customers customers. as safety speak to expanded to the formed of what a drop guess, a of that And balance as, group below the have believe is I through will XX%. think, are Yeah. and there’s of are that in because group I there’s be year be doing. even firsthand will habits XXXX, lot we knowledge to go I a I a we some and

because had roles. So earlier. for to asked remotely, work year I are be the our can our roughly a supporting ask of XX% else, those wanted employees because of XX%, Around here. a X% home a to they mentioned of And that to strongly lot we -- can’t safer that ago, remotely, environment work employees in go create people everybody folks we did

doing are that expecting. are putting wasn’t if because of necessary up a things sanitizing else we were didn’t and partitions we barriers because to it’s XX far as to coming we Plexiglas XX%, up drop a stuff, have putting I But am as in and folks different do below we see to people a create and But because rooms That’s the months, work. core the that things lot over of empty. are be surprised everything back We lot it going are putting faster I’d and it demand. are because grew a does, than last returning

Holden Lewis

and customers in last And our in from first purchased where contributing more share, gains share well, we maybe revenues that million than amounts of to to -- that think before I mix that of we that market were being little part types numbers us to and customers and quarter, our that $XX generated over of now about as to you to -- the our Dave, put and the about Dan’s quarter X% for think And X% to right. think, little amounts think so of some you from year not those to a prior had a over the I PPE you when a sales. second

of think out settles this thought is XXXX, that’s that, I always probably sort have where and XX% right. still We

David Manthey

terms margins, the that. of in gross compared Okay. for return Thank you second, Onsite and could bin to capital? general And of economics operating stock discuss you on vending

Dan Florness

It’s Well, it currently. the the will RFID, the cost piece biggest least is what of because of talk -- is -- different. it, our at the to I that’s and device -- essentially that’s -- much capital the

to What becomes the shelves empty. out actually bin reads RFID It box and We is gather and really how think beams what as Kanban this system, to a set RFID replenish there IR in is, our need in somebody or big tells there’s what environment we tag of you it relative an our bins, supply -- within that this physically will is that changes branch. see a bins is, open MRO the if now an system you there’s Kanban go when think it up empty of right of has and empty chain and put bins. tells a and it But to above, is and up bin There’s team, it have really it. that the that observe bin.

can operate labor the for it the customer the fund were it takes and thing the that’s the I but is illuminate they customer, changing see little for actual biggest reduce is to so, efficiency, much really more lean-up the enablement. bins, The only And are the capital leaner bit it believe for inventory really also our will technology we allows devices the can us a and supply of because thing the can before. chain the so there bins the inventory. they

You have on tag them. an RFID

So except more marketplace. and is the economics becomes efficient than are the actual the vending labor real in business but reason is that piece the relatively to it communication much for serve capital the modest, talking, better

David Manthey

Perfect. Thank you.

Dan Florness

Thanks.

Operator

Thank you.

is Ryan question go ahead. from coming next Blair. Our William Merkel Please of

Ryan Merkel

Thanks. everyone. Hey. Good morning,

Dan Florness

Ryan. HI,

Ryan Merkel

‘XX, you first given that? Can year-over-year the gross guess, you be on that in just gross update headwinds is Holden, to about prior, case on slightly year, for we question that I margins you us thought just new think think up how this the could discussed? or still rethink margins I Holden. need do So, fasteners to

Holden Lewis

seeing. to I some No. to pressures any rethink are that Again, mitigate it. think the don’t are we there’s to try taking need we of actions

of but yeah, suggestion coming is side little are I that -- out about -- basis expect the for year margin think and quarter’s that is changed. incremental discussion into XX% bit flip kind of the ultimately, The year the a will up was I year I to what quarter about I that’s that leverage call, of think against be And the Q translates -- SG&A guidance a the But think that an probably strong this the less. word. to range, difficult kind was I there I don’t made of of and is then I that come points last guidance of discussed what has be when that XX% anything in coming about and and last probably XX think would that, out this we honestly, leverage marginal SG&A we up the to that you expect things of or nature. and on margin comps comps gross think talking quarterly last

Ryan Merkel

Okay. That’s helpful.

headwinds that’s that it the fill-in buy, like about like and doesn’t margins that sounds So increased you sound on because of meaningful. the talked spot the

Holden Lewis

tens of fill-in are of we chain talking buys the So, -- tens supply believe that I again, some the basis as will pressures meaning mean, no, course, points over And bit, course It’s it’s relatively we a about think don’t not not I right? major to of that this here. -- will the and at year, well, Well, small those point. of be taking mitigate and matters. out we smooth those actions are pricing no, we do

Ryan Merkel

Okay.

Holden Lewis

This assumes execute… we that

Ryan Merkel

helpful. Very

Holden Lewis

right? assumes execute strategies This we the well,

Ryan Merkel

Right.

Okay. I on. That’s helpful. pass Thanks. it will

Holden Lewis

Thanks.

Dan Florness

Ryan. Thanks,

Operator

you. Thank

Our of next question is go coming Cleveland from Adam Please Uhlman Research. ahead.

Adam Uhlman

guys. morning. Good Hi,

Dan Florness

Adam. Hi,

Adam Uhlman

you had signings, Onsite field second Hey. you first what am weather. that half then that of there? the expand led wouldn’t February, if it you expectations exactly hearing a Could just maybe are was in signings. the signings maybe to go the negotiations more and by for big guess, I recovery, back like the guys could year have discussion what wondering about I are half probably would have you impacted thought wondering reduce your full from I we I was outlook? to on the seeing

Holden Lewis

Sure.

improve talked we So, can we we do business have market that. haven’t we for million us to pandemic $XX million, we also pre continue to that’s QX, business But believe is conditions and if what conditions believe a to point, wanted to that’s that in they to convey we at meaningfully the and whereas you what $XXX fact is, we I to said to million. quarter where were And they that improved, people believe what $XXX support. achieve the support order have recall, because market landed can this at in that would about the last said time normalized the

quarter pace to so do by That’s we to have booked would that normalized affected XXX, the closer accommodations. one, to being XX just is where fully I one the still right? stretch. before, were we type conditions of to haven’t have in area like it COVID-related seems from And the on that When be believe a given that we do

like when I seemed just and it indication I do. potential think, high a scenario So, given -- we sort a talked that think, I that, think last quarter of, it thing mean, I seemed prudent worth was this we gave like to that

normalizing. We even important But But activity FMI can to going now where said believe market see of a weighted probably support Now result, to up. environment a is the to shorter, note, from pacing marketplace. little thing are come is, anything the QX that we in there. bit that about organization belief the Right providing the not receptivity is I levels as it But are kind thing we has low. the in trend get devices. right? that XX,XXX It’s we continue and but improve levels. the little was quarter, with this we the on part reiterate I we to think may bit the the I do there’s can’t our need don’t of the we same there to to think line of still to are achieve have yet, those FMI don’t this XX,XXX a any tools believe just that

Dan Florness

going am I Yeah. Adam… to comment

Adam Uhlman

Okay.

Dan Florness

them tell for my can the times range. Holden certain And XXX are There was with through I agree XXX I Holden’s with and tell I him into to times Adam. I this, me go and had about flipbook, that mad be that I When in at Holden put them he reading them. certain I saw sentence

that if if one know March. I look is this were where XX I think, believe know him. month quarter, I And with He’s is, of don’t I signings So the right. I of don’t XX first probably agree But our I him. that you with agree in at

as up we through it So the did tick went quarter.

mentioned. storm, that’s Now because usually was and January because is unusual weaker not you an as pattern of February tentative the

of get can’t they in my I there that’s in XXX that think message there of busy They really in being is second that I on reason it to to customers the is energy the of that do you do I it. happily think to But Holden pace people is Otherwise, question probably happen it and this it not takes person, Because about in I right only remove both could release market and why think think just shouldn’t the we faster. of to that we where I your he’s the model betting the can just and didn’t energy. I there’s or completely too a receptive it change he’s wrong. risk to let prioritize more per quarter no right -- the that’s am with the But second getting think signings always internally now. one. want flipbook. busy the more not And from agreement year, I and year and Holden ramp about I our to can’t XXX And right. the is great, quarter. are now. be risk half remove team ask one risk But we I a the him because will But quarter if were and sentence earnings think is, reason at ask up be it is to the the month I’d this

Adam Uhlman

that been how That’s some Okay. increase other to this year I the into Got that to have going inventories expect, initiatives the to secondly, do guess, I internal it’s you discussion, difficult the understand think back inventory then, you helpful. inventories And much support you growth you. on? to need very Thanks. get realizing DCs.

Holden Lewis

we hub need way across it’s we is. it obviously, the being what and way down I product rise. that know am to million-plus would have we continues to does, hubs to to it put the demand a necessarily expect $XX not about more and talked have a of we to make which to I sure versus run I that inventories number on lot degree going I the in think QX, that depend the its And expected. Well, would as

I but do on So, hubs. light the inventory in believe that we are

on pressure to as continues through, well. think, that inflation inventory As of put some run values will I upward

we sure So right what good levels. I of have and ultimate the seeing But part that’s addressing supply But the are chain what I not you in number is. a service are the in for to answer improving we terms answer our now little am of I supply bit on that. inventory, $XX QX low chain it are have we and get bit little need and levels we low required think would QX, on as into fulfillment in a builds and bit to correct more million the a And pressures build. you that little a

be moving inventory. the that take we Now some with doing slow to offset work out that and are degree internally no to will

fulfillment has when Those customer In customized count, little talk to terms out, of inventory. which are tailored and branches all the Those think, much of initiatives more which think sustainable. a about center, I branch, field some reducing I the that a very are branch makes which sense is bit of sort, take the form the that them. to continues we

having chain in of We a mitigate motivate that’s effects on over the does better than now year. in our course would be improving bit off chain. more it the supply will inventory supply to little work of But continue the to our right it the and going

Dan Florness

add can I is… if one the Just

Adam Uhlman

Thank you. Okay.

Dan Florness

worth day’s of things Holden that …is just a keep that’s cites, in context, $XX the million about inventory.

number. So it’s a

question of incredible helpful, But point point. blessed a day’s The and the disclosing -- of an supply price is we is inventory. as it helped with things, have but where always You as it’s in chain resiliency inventory. for are far the worth incredible was the context intake

Operator

you. Thank

Our Stanley. Josh Morgan next from Pokrzywinski Please is of ahead. coming question go

Josh Pokrzywinski

Hey. Good guys. morning,

Dan Florness

Josh. Hi,

Holden Lewis

morning. Good

Josh Pokrzywinski

Just morning. good -- back to

a in Holden, to, for which of cost, out more of dynamics laid buys the acute having back those that’s Ryan’s some considering fair before? a about, putting question, to the it, if just more mix, of year I still like considerations while. to point if you half of just earlier maybe what to there a think Should shift for was like Just trying us pretty than that maybe were of that just set still that timing sense XQ, some in as margin know not you persist we in particularly that a number? those some price level the on second on expectation, bit dynamic quarter. underneath on you fine year, seem think, gross I but the some total last talked with but

Holden Lewis

little really in mean, I of the bit. know terms so think think year-over-year on I we margin question and don’t change. through tried still rate I of relatively about that easy XQ in to we it so. have haven’t gross think comp to No. am I a trying all a

and gross intention you that, if for Adjust focused the think be which is I adjust take is the write-down, be our on will ‘XX first done. you XQ quarter margin, that a you about normally I margin that, XQ, from If over move XX.X%. decline at looking a quarter first would see second for a of to bit QX. are quarter little sequentially

mixes. part now, I think right the fastener/non-fastener reason the about. you the around that could the that, somewhere that enough, mix come of mix in is than is and Onsite/non-Onsite are talking normalizing Interestingly flattish faster

assuming as will on And of as well that that that moderated possible be are see so and bit pricing think impact QX. and we to we that. mix effective in moderate contribute But a that that it’s plays actually can course, of little how out could contributes in And well. I QX the

instead about messy can patterns I and when gross terms quarter would sequential to about think, XX-basis-point I when think obviously I decline, of be I to a think margins, flattish just guess, the that’s run try it comp think help? increase more thinking that of kind the about little second I So of QX, I a actually think gets could -- about normal issue. when that. run think And in off but really it year-over-year we think of That and about bit that year-over-year, meaningful it a that

Josh Pokrzywinski

grow of grow in of back into helpful supply That interruptions And the step-up was chain little weather about. there guess, Yes. lot a then, related faster, a in flattish had went lot. the I I maybe pretty until to to Dan to talked everything a helps But I sequentially bit down if Got sort big in Is activity tightness immediately. perspective. is to it. days mean, March, That’s guess, there sort Understanding to that I able side? a fastener able continues the of reopen I capacity are way, on presumably XQ talked am there the some thinking it your and here, know just isn’t those here stuff really homogenous, XQ? something you of supply can limits to of being growth upside as really to anywhere. governed short-term, so being on come the things not short-term about some kind the that the make But that customers at out? in least that that’s chain up works in

Dan Florness

power growth, for -- think think you of supply. no I distribution to for that do in of had was One because center have there about of not electricity. five of our problems. I caused When demand, down was you down shut When didn’t we think days February, with things limit in number I plants there Dallas talked a was

had digits, a things I realize get I And lot grew so so that north, into a you and -- I the in examples the where Wisconsin, of up you when up temperatures single saw freeze of in lot that. grew

You plants weren’t was no good and and where pipes that electricity you they had freezing. operating there had

thousands they and froze of feet replaced in pipes being hundreds a lot and You of broke. of facilities had because they

power what environment operate. no describing damage the no issue scenario then are of no the so That’s gas energy natural and essentially than to And one the or we from was different and a here.

a Our to more every chain ability demand and want to that factor us find our is limiting partner. as use customers day supply

Holden Lewis

Yeah.

Josh Pokrzywinski

Got it.

Holden Lewis

some as And on well… level

Josh Pokrzywinski

it. Appreciate

Holden Lewis

out on industries mean, are there I some as mean, level there. well. Yeah. I

auto RVPs chips I think that. because some talk affected like that by about availability the of and of down are lines things shutting

as But products that to So know aren’t that do to issues are as would industries our well. you well as products. might because related having referring we what you of be

that we can Our to needs that sure customer is something can get supply a that that. we make objective when

that. supply through. chain might We We have chip the can’t or how doing control flow been effective that

Josh Pokrzywinski

Got it. Appreciate it. guys. Thanks

Dan Florness

Sure.

Operator

you. Thank

question next Deutsche from Kevin go Marek ahead. Please coming is of Bank. Our

Kevin Marek

morning. Good Hi.

Dan Florness

Good morning.

Kevin Marek

been I made lot think going just to called you I has already, know market share but I the point said gains. out. about back

share anything it buyers areas and Is accounts you up this were about think made gains pandemic point. over maybe PPE PPE there XX% that period? have shaped add of of I gains like would reordered was first-time this in how at core outside have

Holden Lewis

distributors there’s that do mean, no how I up industry Yeah. -- anything resource on the all definitive there’s and that. tallies unfortunately, gives

and the you saw think, new things we of pandemic interesting had that us So, as an safety like usually that. acquisition picture customers and what and to is But that I so provided dramatic period new around during customer time. not

to that out are slightly So you Industrial it’s as think you there that and are was say certainly things production And pointing I still still difficult think I would really some negative. business. a were done growing. were February, What think if distribution say. surveys and We are don’t negative. There that through production I that grow. grow look at industrial to seeing continue of is to we those surveys nature, I being

have look to at the ways the gaining production. industrial outgrown it are or usually degree we think, I So, I our judge understand that Historically, we outgrown have share. market to Historically, industry. are those we which

QX. that through think continued that I

we do I continue will I the and you for think numbers to think out to there that. are evaluate

Kevin Marek

sense. Got question, maybe I a looks It maybe or the any can it. directly kind manufacturing trends you there a comp Maybe to makes am by versus about two? trends versus Is delineate up improvement, just thinking kind the prior manufacturing could color March. you wondering as like just on acceleration construction about between market, just following talk within of quick kind related. if That results through construction maybe, seeing follow-up No. of more provide of quarter the

Holden Lewis

to move has nice if February about know, look marks flat, and it’s if construction RVPs better, the talking was been recent down But so better and see was so it fairly January, and them in one construction to I have the didn’t XX.X% look really construction, I business, it and significant the Well, and that mean, that you mean, at and you March don’t interestingly, in at move. down begin was been I improvement. numbers this and months, X% in getting

within construction the been. improving go last for that reporting to been But market I are it that. caused markets they a easier. of comps several going RVPs play of Now, right, But versus got me up manufacturing, comps was which mean, lag have XX%, to up getting the right? So But there’s where are true role. end the it both to up -- months you tone and of construction the a feels bit to are the better that’s to X% been the from like those have X% the to a

Kevin Marek

Got it. very Thanks much.

Holden Lewis

Sure.

Dan Florness

for and Take I So guess all. Fastenal support it your the will for is five thanks Team. just minutes to wrap I we thank to want hour Q&A. Blue today care the up everybody to And listening in and and

Holden Lewis

Thanks.

Operator

concludes thank This today’s for gentlemen, you and participation. your event. Ladies

webcast this off day. wonderful at lines have or your You may a the disconnect log and time

Fastenal (FAST) 13 Apr 212021 Q1 Earnings call transcript