Q2 2024 Fastenal Co Earnings Call

Good morning and welcome to the Fastenal 2nd Quarter 2024 Earnings Results Conference Call. At this time, all participants are in a listen-only mode.

Operator: 2024 Earnings Results Conference Call. At this time, all participants are in a listen-only mode.

Operator: for 2024 Earnings Results Conference Call. At this time, all participants aren't in a listen-only mode. The question and answer session will follow the formal presentation.

Operator: The question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Taylor Aranza of Fastenal Company. Thank you.

Speaker Change: The question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Taylor Randa of Fastenal Company. Thank you. You may begin.

Operator: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Taylor Ranza: I would now like to turn the call over to Taylor Ranza, a fast and all company. Thank you. You may begin.

Taylor Aranza: You may begin. Welcome to the Fastenal Company 2024 Second Quarter Earnings Conference Call. This call will be hosted by Dan Florness, our President and Chief Executive Officer, and Holden Lewis, our Chief Financial Officer. The call will last for up to one hour and will start with a general overview of our quarterly results and operations, with the remainder of the time being open for questions and answers. Today's conference call is a proprietary Fastenal presentation and is being recorded by Fastenal. No recording, reproduction, transmission, or distribution of today's call is permitted without Fastenal's consent.

Taylor Ranza: Welcome to the fast and all company. 2022 and 24 second quarter earnings conference call.

Taylor Randa: Welcome to the Fastenal Company 2024 Second Quarter Earnings Conference Call.

Taylor Ranza: This call will be hosted by Dan Flarnas, our President and Chief Executive Officer, and Holden Lewis, our Chief Financial Officer. The call will last for up to one hour, and we'll start with a general overview of our quarterly results and operations, with the remainder of the time being open for questions and answers.

Speaker Change: This call will be hosted by Dan Florness, our President and Chief Executive Officer, and Holden Lewis, our Chief Financial Officer. The call will last for up to one hour, and we'll start with a general overview of our quarterly results and operations, with the remainder of the time being open for questions and answers.

Operator: Today's conference call is a proprietary fast and all presentation and is being recorded by fast and all. No recording, reproduction, transmission, or distribution of today's calls permitted without fast and full consent.

Speaker Change: Today's conference call is a proprietary Fastenal presentation and is being recorded by Fastenal. No recording, reproduction, transmission, or distribution of today's call is permitted without Fastenal's consent.

Taylor Aranza: This call is being audio simulcast on the internet via the Fastenal Investor Relations homepage, investor.fastenal.com. A replay of the webcast will be available on the website until September 1st, 2024 at midnight central time. As a reminder, today's conference call may include statements regarding the company's future plans and prospects. These statements are based on our current expectations, and we undertake no duty to update them. It is important to note that the company's actual results may differ materially from those anticipated.

Operator: This call is being audio soundcast on the internet via the fast and all investor relations homepage, investor dot fast and all dot com. A replay of the webcast will be available on the website until September 1st, 2024, at midnight Central Time.

Speaker Change: This call is being audio simulcast on the Internet via the Fastenal Investor Relations homepage, investor.fastenal.com.

Speaker Change: A replay of the webcast will be available on the website until September 1st, 2024 at midnight central time.

Unknown Executive: As a reminder, today's conference call may include statements regarding the company's future plans and prospects. These statements are based on our current expectations, and we undertake no duty to update them. It is important to note that the company's actual results may differ materially from those anticipated.

Taylor Aranza: Factors that could cause actual results to differ from anticipated results are contained in the company's latest earnings release and periodic filings with the Securities and Exchange Commission, and we encourage you to review these factors carefully. I would now like to turn the call over to Mr. Dan Flournoy.

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

Unknown Executive: Factors that could cause actual results to differ from anticipated results are contained in the company's latest earnings release and periodic filings with the Securities and Exchange Commission, and we encourage you to review these factors carefully.

Dan Florness: I would now like to turn the call over to Mr. Dan Flarnas. Thank you and good morning, everybody, and welcome to the second quarter 2024 earnings call. Before I start on the quarter, I just wanted to share a couple of things.

Daniel L. Florness: Thank you and good morning everybody, and welcome to the second quarter 2024 earnings call. Before I start talking about the quarter, I just wanted to share a couple things. First off, I want to share a story about an on-site of ours in Sweeney, Texas. And I'll be speaking with Steve Diekmann, our regional vice president based out of Houston. And for those of you that I suspect most people on the call are aware that Houston periodically gets hurricanes, and they had a hurricane.

Daniel L. Florness: Thank you, and good morning, everybody, and welcome to the second quarter 2024 earnings call.

Daniel L. Florness: Before I start on the quarter, I just wanted to share a couple things. First off, I wanted to share a story about an onsite of ours in Sweeney, Texas.

Dan Florness: First off, I wanted to share a story about an on side of ours in Sweetie, Texas. And I was speaking with Steve Deakman, our regional vice president based out of Houston. For those of you that I suspect most people on the call are aware that Houston periodically gets hurricanes, and they had a hurricane. And typically what happens when there's a hurricane, and this might be Steve Deakman in Houston, it might be Bob Hopper down in Florida. All the time they'll get a call from here from Casey and to see how this is before, to see how everything's going.

Daniel L. Florness: And I'll speaking with Steve Dieckmann, our regional vice president based out of Houston. And for those of you that I suspect most people on the call are aware that Houston periodically gets hurricanes.

Daniel L. Florness: And typically, what happens when there's a hurricane, and this might be Steve Diekmann, and in Houston; it might be Bob Hopper down in Florida, oftentimes, they'll get a call from me or from Casey and to see how everything's going. And we often remind them that we have their backs. And what that means is when you're in the chaos of the moment, you're forced to make decisions on the fly.

Daniel L. Florness: and they had a hurricane.

Daniel L. Florness: and typically what happens when there's a hurricane, and this might be Steve Diekmann in Houston, it might be Bob Hopper down in Florida, oftentimes they'll get a call from me or from Casey, and this is before, to see how everything's going.

Dan Florness: And we often remind them of we got their back. And what that means is when you're in the chaos of the moment, you're forced to make decisions on the fly, and there's a lot of things going on, and somebody with 20/20 hindsight a week later might pick apart the decision you make at three in the morning to solve a problem. My comment to Steve and Bob is always, "we've got your back, make great decisions to take care of our customers and to protect your employees." Period.

Daniel L. Florness: And we often remind them of, we got their back. And what that means is, when you're in the chaos of the moment,

Daniel L. Florness: And there are a lot of things going on. And you know, somebody with 2020 hindsight, a week later, might pick apart the decision you make at three in the morning to solve a problem. My comment to Steve and Bob is always, we've got your back, make great decisions to take care of our customers and to protect your employees, period. So, and the second thing, and this happened a few years ago, read an article about a retirement community in Florida during the hurricane. They were without power and without resources for a few days.

Daniel L. Florness: You're forced to make decisions on the fly and there's a lot of things going on and, you know, somebody with 20-20 hindsight a week later might pick apart a decision you make at three in the morning to solve a problem. My comment to Steve and Bob is always, we've got your back.

Daniel L. Florness: Make great decisions to take care of our customers and to protect your employees, period.

Dan Florness: So the second thing, and this happened a few years ago, read an article about a retirement community in Florida during the hurricane. They were without power and out resources for a few days. And when you read something like that, you kind of like, how the hell does that happen in today's world? And so one thing I often will throw in there and say, hey, make sure your branches are paying attention to facilities around their area. It might be a hospital, it might be a retirement home; whatever it is. Call them up and see if they're okay until they need something.

Daniel L. Florness: So, and the second thing, and this happened a few years ago, read an article about a

Daniel L. Florness: And when you read something like that, you're kind of like, "How the hell does that happen in today's world?" And so one thing I often will throw in there and say, "Hey, make sure your branches are paying attention to facilities around their area. It might be a hospital, it might be a retirement home, whatever it is. Call them up to see if they're okay.

Daniel L. Florness: Retirement Community in Florida during the hurricane, they were without power and without resources for a few days. And when you read something like that, you're kind of like,

Daniel L. Florness: How the hell does that happen in today's world? And so one thing I often will throw in there and say, hey, make sure your branches are paying attention to facilities around their area. It might be a hospital, it might be a retirement home, whatever it is.

Daniel L. Florness: So they need something. I don't care if they're a customer of ours or not. Be there to help because that's what we are. We're a supply chain when people need stuff. So, we have an on-site in Sweeney, Texas with Phillips 66. It's a refining facility. Refining facilities can be demanding customers. You think about what they do. It's a facility where really bad things can happen if they're not on their game. And so they need something they don't need tomorrow. They don't need it next week.

Dan Florness: I don't care if they're a customer of ours or not; be there to help because that's what we are. We're a supply chain when people need stuff.

Daniel L. Florness: Call them up and see if they're OK.

Daniel L. Florness: So they need something. I don't care if they're a customer of ours or not. Be there to help because that's what we are. We're a supply chain when people need stuff.

Daniel L. Florness: They need it. And so Wade, one of our employees at the on-site, he comes into work on Sunday evening, doesn't normally come into work on Sunday evening. He came to be there all night long because if they need something, he's there to supply that need. So the hurricane hit on Monday at about two o'clock in the morning. I think it lasted about six hours in that area.

Dan Florness: So, you know, we have an onsite in Sweetie, Texas, with Philips 66. It's a refining facility. Refining facilities can be demanding customers. You think about what they do. It's a facility where really bad things can happen if they're not on their A game. And so they need something. They don't need it tomorrow. They don't need it next week. They need it. And so Wade, one of our employees at the onsite, he comes into work on Sunday evening. He doesn't normally come into work on Sunday evening. He came to be there all night long because if they need something, he's there to supply that need.

Daniel L. Florness: So, you know, we have an onsite in Sweeney, Texas with Phillips 66 at the refining facility.

Daniel L. Florness: Refining facilities can be demanding customers. If you think about what they do, it's a facility where really bad things can happen if they're not on their A-game. And so they need something, they don't need it

Daniel L. Florness: Tomorrow. They don't need it next week. They need it.

Daniel L. Florness: And so Wade, one of our employees at the on-site, he comes into work on Sunday evening. He doesn't normally come into work on Sunday evening.

Daniel L. Florness: He came to be there all night long, because if they need something, he's there to supply that need. So the hurricane hit.

Dan Florness: So the hurricane hit on Monday about two o'clock in the morning. I think it lasted about six hours in that area. Good chunk of Houston is without power right now, but our customers in that area get served by Fast and All. If you, if you go to our branches, you'd find out a lot of our branches right now have no power. Their point of sale system and our lights are being run by generators, which means when there's a hundred and six degree heat index, it gets a little warm in there. So in the afternoon, they hop in their pickups and they go call on their top 15 customers.

Daniel L. Florness: On Monday, about two o'clock in the morning, I think it lasted about six hours in that area. A good chunk of Houston is without power right now, but our customers in that area get served by Fastenal. If you go to our branches, you'd find out a lot of our branches right now have no power.

Daniel L. Florness: A good chunk of Houston is without power right now, but our customers in that area get served by Fastenal. If you go to our branches, you'd find out a lot of our branches right now have no power. Their point of sale system and their lights are being run by generators, which means when there's a 106-degree heat index, it gets a little warm in there.

Daniel L. Florness: Their point-of-sale system and their lights are being run by generators.

Daniel L. Florness: So in the afternoon, they hop in their pickups, and they call their top 15 customers. They'll call their other customers, is there anything we need? Most other businesses are hunkered down, maybe not being there in the same way. We're out there for a pragmatic reason. The only way you're gonna get AC at one in the afternoon in a 160-degree heat index is to be in your truck.

Daniel L. Florness: which means when there's a hundred and six degree heat index.

Daniel L. Florness: It gets a little warm in there, so in the afternoon, they hop in their pickups.

Dan Florness: They'll call their the customers. Is there anything we need? Most other businesses are hunkered down, maybe not being there in the same way. We're out there for a pragmatic reason. The only way you're going to get AC at one in the afternoon, in a hundred and six degree heat index, is being your truck. But go see your customer. Let them know we're there to serve them.

Daniel L. Florness: and they go call on their top 15 customers. They'll call their other customers. Is there anything we need? Most other businesses are hunkered down, maybe not being there in the same way.

Daniel L. Florness: But go see your customer. Let them know we're there to serve them. A great thing about Fastenal.

Daniel L. Florness: We're out there for a pragmatic reason. Only way you're gonna get AC at one in the afternoon in a 106 degree heat index is be in your truck. But go see your customer, let them know we're there to serve them.

Dan Florness: Great thing about Fast and All, and thank you to Wade for doing the night shift on Monday morning.

Daniel L. Florness: And thank you to Wade for doing the night shift on Monday morning. The second thing I wanted to touch on is I want to congratulate our technology. Last fall we did a lot, and we started some projects around AI, or as I prefer to refer to it internally, FI. It's not artificial intelligence; it's fast intelligence because the source data is our data, and it's a really robust system that we decided to go out and build.

Daniel L. Florness: Great thing about Fastenal. And thank you to Wade for doing the night shift on Monday morning.

Dan Florness: The second thing I wanted to touch on is I want to congratulate our technology team. Last fall, we did a lot. We're starting some projects around AI, or as I prefer to refer to it internally. It's not Artificial Intelligence. It's fast intelligence because the source data is our data. And it's a really robust system that we decided to go out and build. And our goal was to roll it out in the second quarter for our folks to start using it. Rolled out on June 28th. It's out there. Our folks are using it, and I had the ability to test it some in early June.

Daniel L. Florness: The second thing I wanted to touch on is I want to congratulate our technology team.

Daniel L. Florness: Last fall, we did a lot, we're starting some projects.

Daniel L. Florness: around AI, or as I prefer to refer to it internally, FI.

Daniel L. Florness: And our goal was to roll it out in the second quarter for our folks to start using it. It rolled out on June 28. It's out there, our folks are using it, and I had the ability to test it some in early June.

Daniel L. Florness: It's not artificial intelligence, it's fast intelligence because the source data is our data and it's a really robust system that we decided to go out and build. And our goal was to roll it out in the second quarter for our folks to start using it.

Daniel L. Florness: It rolled out on June 28th.

Daniel L. Florness: It's out there, our folks are using it, and I had the ability to test it some in early June . What amazed me, it's scary good.

Dan Florness: What amazed me, it's very good. What this technology can do. And the way it's set up is we have a general information. And it's it's our chat about blue that we created about five years ago. And in the old system had 130, 140,000 Q&A pairs. And based on a probability match, you got what you got. Now you actually get a well thought out answer. And it tells you the source of your information. And you can look internally at fast and only data. So it's fast and intelligent. And if you want to go deeper, you can go externally if you want.

Daniel L. Florness: What amazed me was how good this technology can do. And the way it's set up is we have general information in it. And it's, it's our chat bot Blue that we created about five years ago.

Daniel L. Florness: And in the old system, there were 30, 140,000 Q&A pairs. And based on a probability match, you got what you got. Now you actually get a well-thought-out answer, and it tells you the source of your information. And you can look internally at Fastenal-only data, so it's Fastenal intelligence.

Daniel L. Florness: What this technology can do. And the way it's set up is we have a general information and it's, it's our chatbot loop that we created about five years ago. And in the old system had a hundred and

Daniel L. Florness: 30, 140,000 Q&A pairs. And based on a probability match, you got what you got.

Daniel L. Florness: Now you actually get a well-thought-out answer, and it tells you the source of your information, and you can look internally at Fastenal-only data, so it's Fastenal Intelligence.

Daniel L. Florness: And if you want to go deeper, you can go externally if you want. But you know the source, and you know how it is. The source of the information is the quality of the information. And sometimes you get what you get when you're on the wild web.

Daniel L. Florness: And if you want to go deeper, you can go externally if you want, but you know the source, and you know how it is, the source of the information is the quality of the information.

Dan Florness: But you know the source, and you know how it is. The source of the information is the quality of the information. And sometimes you get what you get when you're on the Wild Web. But, but it's great information on general supply chain questions. We've embedded Bob Kerlin's book to power fast on people. So there's great leadership insight. Take your asking Bob a question. It's published right now in 30 plus languages.

Daniel L. Florness: But it's great information on general supply chain questions. We've embedded Bob Kirtland's book, The Power of Fastenal People, so there's great leadership insight. It's like you're asking Bob a question. It's published right now in 30-plus languages.

Daniel L. Florness: And sometimes you get what you get when you're on the wild web.

Daniel L. Florness: But it's great information on general supply chain questions. We've embedded Bob Kirtland's book, The Power of Fastenal People, so there's great leadership insight. It's like you're asking Bob a question. It's published right now in 30-plus languages. And the next piece we're working on that's going to deploy here in third quarter

Daniel L. Florness: And the next piece we're working on that's going to deploy here in the third quarter is an AI-assisted sourcing tool. And conceptually, what we're after is an employee to be able to look, hop on this tool, and identify what this item the customer is asking for. What else is it?

Dan Florness: And the next piece for work on that's going to deploy here in third quarter is an AI-assisted sourcing tool. And conceptually, what we're after is an employee to be able to look up on this tool and identify what is the site of the customer's asking for. What else is it so I can help rationalize clear product substitution, depending on if you need it right now. Maybe this isn't available for three days, but we have three things that could substitute for it. What do you need? And then understanding the supply chain. This is readily available. This is difficult to get until you can have that discussion with your customer and then understand the market for that.

Daniel L. Florness: is an AI-assisted sourcing tool.

Daniel L. Florness: Identify what is this item the customer is asking for.

Daniel L. Florness: So I can help rationalize clear product substitutions depending on whether you need it right now. Maybe it isn't available for three days, but we have three things that could substitute for it. What do you need?

Daniel L. Florness: What else is it? So I can help rationalize clear product substitutions depending on if you need it right now. Maybe this isn't available for three days, but we have three things that could substitute for it. What do you need?

Daniel L. Florness: And then understanding the supply chain, what is readily available, and what is difficult to get. And so you can have that discussion with your customer. And then understand the market for that. What's the price of the market? What should you expect to pay for it?

Daniel L. Florness: And then understanding the supply chain. This is readily available, this is difficult to get. And so you can have that discussion with your customer. And then understand the market for that. What's what's the price of the market? What should you expect to pay for it? Because maybe it's something we haven't sold before.

Dan Florness: What's the price of the market? What should you expect to pay for it? Because maybe it's something we haven't sold before. But it really is a tool that's being built. Going to roll it out in the third quarter. We're excited about it. And we'll see all that goes from there, but fast on intelligence, not artificial intelligence.

Daniel L. Florness: Because maybe it's something we haven't sold before, but it really is a tool that's being built and we're going to roll it out in the third quarter. We're excited about it. And we'll, and we'll see how that goes from there. But fast on intelligence, not artificial intelligence. Third, take a look at the flip book. Talk a little bit about the border.

Daniel L. Florness: But it really is a tool that's being built, gonna roll it out in the third quarter, we're excited about it, and we'll see how that goes from there, but fast intelligence, not artificial intelligence.

Dan Florness: Third, take a look at the flip flip. Talk a little bit about the quarter. Top quarter, and that's sales grew about two percent. Underline market, it remains challenging. EPS was down with 51 cents, down about 2%. You know, the item I shared with the board yesterday. The team within fast, no, looks in a mirror and says, what are we being paid to do? Are we being paid to defend margin when we're growing 2%, or are we being paid to figure out how to not grow 2%? The bias goes towards the latter, but we put emphasis on the former as well.

Daniel L. Florness: Tough quarter. Net sales grew about 2%. The underlying market remains challenging. EPS was down by 51 cents, down about 2%.

Daniel L. Florness: Third, take a look at the flip-flops. Talk a little bit about the quarter.

Daniel L. Florness: Tough quarter. Net sales grew about two percent. Underlying market remains challenging. EPS was down with 51 cents, down about two percent. You know the item I shared with the board yesterday.

Daniel L. Florness: You know, the item I shared with the board yesterday. The team within Fastenal looks in the mirror and says, "what are we being paid to do? Are we being paid to defend margin? We're growing 2%, or are we being paid to figure out how to not grow 2%?" The bias goes towards the latter.

Daniel L. Florness: The team within Fastenal looks in a mirror and says, what are we being paid to do?

Daniel L. Florness: Are we being paid to defend margin?

Daniel L. Florness: Will we grow in 2%?

Daniel L. Florness: Are we being paid to figure out how to not grow 2%?

Daniel L. Florness: But we put emphasis on the former as well. And so I think we have found the appropriate balance. Does that mean we did everything perfectly? No, there's always room for improvement.

Daniel L. Florness: The bias goes towards the latter, but we put emphasis on the former as well. And so I think we found the appropriate balance. Does that mean we did everything perfectly? No. There's always room for improvement, but I think we're appropriately balancing where we're going and how to not grow 2%.

Dan Florness: And so I think we found, I think we found the appropriate balance. Does that mean we did everything perfectly? No, there's always room for improvement. But I think we're appropriately balancing where we're going and how to not grow 2% with defending the margin at 2%.

Daniel L. Florness: with defending the margin at 2%.

Daniel L. Florness: But but I think we're appropriately balancing where we're going and how to not grow 2% with defending the margin at 2%. As you see in the table on the next slide, I'll get to that in a few minutes, but we continue to be in that sub-50 ISM, the Purchasing Managers Index, and that's 19 of the last 20 months. We saw a blip in March that proved to be a It's an uncommonly long duration that weighs on US industrial production and consequently affects our daily sales rates because 75% of our revenue is from industrial sources.

Dan Florness: As you see in the table on the next slide, I'll get to that in a few minutes, but we continue in that sub-50 ISM, the Purchasing Managers Index. And that's 19 of the last 20 months. We saw a blip in March that proved to be a head fake. It's an uncommonly long duration that weighs on US industrial production and constantly affects our daily sales rates because 75% of our revenue is industrial.

Daniel L. Florness: As you see in the table on the next slide, I'll get to that in a few minutes, but we continue in that sub-50 ISM, the Purchasing Managers Index.

Daniel L. Florness: And that's 19 of the last 20 months. We saw a blip in March. That proved to be a head fake.

Daniel L. Florness: It's an uncommonly long duration that weighs on U.S. industrial production and consequently affects our daily sales rates because 75% of our revenue is industrial.

Daniel L. Florness: Our efforts to accelerate our customer acquisition remain encouraging. You know, a year, a year and a half ago, we had some pretty frank discussions on this call about some missteps that we saw occurring in 2021 and 2022, where our focus on a common goal became blurred. I think there was a little bit too much of what I'm doing and not what we're doing. And when everyone individually is successful, but we're not successful, something's wrong with alignment.

Dan Florness: Our efforts to accelerate our customer acquisition remain encouraging. You know, a year, year and a half ago, had some pretty frank discussions on this call about some missteps that we saw occurring in 2021 and 2022, where our focus on a common goal became blurred. I think there was a few a little bit too much of what I'm doing and not what we're doing. And when everyone individually successful, but we're not successful, something's wrong with alignment. So I lined all the sales organization under Jeff Lots at the time, Jeff's a proven strong leader of the organization.

Daniel L. Florness: Our efforts to accelerate our customer acquisition remain encouraging. You know, a year, year and a half ago, we had some pretty frank discussions on this call.

Daniel L. Florness: About some missteps that we saw occurring in 2021 and 2022, where our focus on a common goal became blurred.

Daniel L. Florness: I think there was a little bit too much of what I'm doing and not what we're doing. And when everyone individually is successful, but we're not successful, something's wrong with alignment. So I aligned all the sales organizations.

Daniel L. Florness: So I lined up all the sales organizations under Jeff Watts at the time. Jeff's a proven strong leader of the organization. I have to say Jeff's done a wonderful job in the last 12 to 18 months of pulling this thing together. But it wasn't just Jeff. It was Jeff and his team. Casey Miller stepping up in the US. Miguel Antoni stepping up in international.

Daniel L. Florness: Under Jeff Watts at the time. Jeff's a proven strong leader of the organization. I have to say Jeff's done a wonderful job in the last 12 to 18 months.

Dan Florness: I have to say Jeff's done a wonderful job in the last 12, 18 months of pulling this thing together, but it wasn't just Jeff. It's Jeff and his team. It's Casey Miller stepping up in the U.S. It's Miguel and Tony stepping up international. It's Bill Praskowski stepping up, and everybody else that supports them, including me, stepping up their game to support the sales team as we align on a common goal.

Daniel L. Florness: of pulling this thing together, but it wasn't just Jeff.

Daniel L. Florness: It's Jeff and his team.

Daniel L. Florness: It's Casey Miller stepping up in the U.S. It's Miguel Antoni stepping up international. It's Bill Truskowski stepping up and everybody else that supports them.

Daniel L. Florness: It's Bill Kraskowski stepping up and everybody else that supports them, including me, stepping up their game to support the sales team as we align on a common goal. And I think you're seeing that in the second straight quarter of strong onsite FMI signing and Low Double-Digit Growth in National Contract. As I mentioned earlier, we believe we have the right balance for managing our costs. And we will continue to maintain this balance. But I have reemphasized with our leadership team and as well as Holden and everybody else that this isn't a two person endeavor.

Speaker Change: including me stepping up their game to support the sales team as we align on a common goal and I think you're seeing that in the second straight quarter of strong on-site and FMI signings.

Dan Florness: And I think you're seeing that in the second straight quarter of strong onsite, NFMI signings. and Low Double Digit Growth in National Contract Counts. As I mentioned earlier, we believe we have the right balance for managing our costs, and we continue to maintain this balance. But I have reemphasized with our leadership team and as well as Holden and everybody else, this isn't a two-person endeavor; this is a 23,000-person endeavor. We need to be really tight with spending in the current environment. You know, the one thing that helps us in the latter half of both three, 23, excuse me, in the first half of 24, is we have some wiggle room because of declining incentive comp.

Speaker Change: and Low Double-Digit Growth in National Contract Counts.

Daniel L. Florness: This is a 23,000 person endeavor. We need to be really tight with spending in the current environment. You know, the one thing that helps us in the latter half of all three, 23, excuse me, in the first half of 24, is we have some wiggle room because of declining incentive comp. But that wiggle room keeps getting thinner and thinner, and so we need to be more dialed in. Again, in all frankness, we felt in the first quarter as we were exiting, that the second quarter was going to play a little differently.

Speaker Change: As I mentioned earlier, we believe we have the right balance for managing our costs and we continue to maintain this balance. But I have reemphasized with our leadership team and as well as Holden and everybody else, this isn't a two-person endeavor, this is a 23,000-person endeavor.

Speaker Change: We need to be really tight with spending in the current environment.

Speaker Change: You know, the one thing that helps us in the latter half of all three, 23, excuse me, in the first half of 24,

Dan Florness: That wiggle room keeps getting thinner and thinner, and so we need to be more dialed in. Again, in all frankness, we felt in the first quarter, as we were exiting, that the second quarter was going to play a little differently. We realized as we went through April that was not to be the case. Then early May, we tightened it down a bit, and we've tightened down some more here in July. As you would expect from a distribution business, we continue to generate a very healthy operating cash flow, and we have an incredibly flexible and strong balance sheet.

Speaker Change: If we have some wiggle room because of declining incentive comp.

Speaker Change: That wiggle room keeps getting thinner and thinner, and so we need to be more dialed in.

Daniel L. Florness: We realized as we went through April that that was not to be the case. Then, in early May, we tightened it down a bit. And we've tightened down some more here in July. But, as you would expect from a distribution business, we continue to generate a very healthy operating cash flow, and we have an incredibly flexible and strong balance sheet. Page four is probably a weird chart. You know what? I asked Holden. Hey, can we just put the table in? Because I have this nice table of ISM data going back. He's got it going back 5060 years or whatever the heck it is, but I have it going back a decade.

Speaker Change: Again, in all frankness, we felt in the first quarter, as we were exiting, that the second quarter was going to play a little differently. We realized as we went through April , that was not to be the case. Then early May, we tightened it down a bit, and we've tightened it down some more here in July .

Speaker Change: As you would expect from a distribution business, we continue to generate a very healthy operating cash flow and we have an incredibly flexible and strong balance sheet.

Dan Florness: The page four is probably a weird chart. You know what, I asked Holden, hey, can we just put the table in because I have this nice table of ISM data going back. He's got it going back 50, 60 years or whatever the heck it is, but I have it going back in decade. I said, can we show it in because I think it's really good for our investor and our employees to appreciate the environment that we're in. And so we had all these numbers in there, and then Holden came to me a couple days ago and said, you know, we actually can't publish that because that's a subscribed service.

Speaker Change: The page four is probably a weird chart.

Speaker Change: You know what, I asked Holden, hey, can we just put the table in, because I have this nice table of ISM data going back. He's got it going back 50, 60 years or whatever the heck it is, but I have it going back a decade.

Daniel L. Florness: I said, "Can we show it in? I think it's really good for our investors and our employees to appreciate the environment that we're in. And so we had all these numbers in there. And then Holden came to me a couple of days ago and said, You know, we actually can't publish that because that's a subscribed service. I said, Well, can you just fill in the blanks and input a red square wherever the sub-50 is, so you can at least say magnitude? And he said, Yeah, we can do that.

Speaker Change: I said, can we show it ends? I think it's really good for

Speaker Change: Our investor and our employees to appreciate the environment that we're in. And so we had all these numbers in there and then Holden came to me a couple days ago and said, you know, we actually can't publish that because that's a subscribed service.

Dan Florness: I said, well, can you just put in blanks and put a red square wherever the sub 50 is, so you can at least say magnitude, and he's like, yeah, we do that. So what you see here is a lot of nothing except for the fact you can see the duration of sub 50 ISM over the last decade plus 12 years. And you can see that since November of 2022, except for March of this year, we've been sub 50. So we had 16 consecutive months to now 19 out of 20 months. And if you look at that little table in the in the bottom left, there's eight periods that Holden highlighted with extended sub-50 PMI readings.

Speaker Change: I said, well, can you just put in blanks and put a red square wherever the sub 50 is so you can at least say magnitude? And he's like, yeah, we can do that. So what you see here is a lot of nothing.

Daniel L. Florness: So what you see here is a lot of nothing, except for the fact that you can see the duration of sub-50 ISM over the last decade plus 12 years. And you can see that since November of 2022, except for March of this year, we've been sub-50. So we had 16 consecutive months and now 19 out of 20 months. And if you look at that little table in the bottom left, there are eight periods that Holden highlighted with extended sub-50 PMI readings. The third one, July of 81 to June of 83, was the longest period I remember that I was just out in college, just getting out of just getting out of high school.

Speaker Change: Except for the fact you can see the the duration of sub 50 ISM.

Speaker Change: over the last decade plus 12 years.

Speaker Change: And you can see that since November of 2022.

Speaker Change: Except for March of this year, we've been sub 50.

Speaker Change: So we had 16 consecutive months and now 19 out of 20 months. And if you look at that little table in the bottom left, there's eight periods that Holden highlighted with extended sub-50 PMI readings.

Dan Florness: The third one, July 81 to June of 83, was the longest period. I remember that I was just out in college just got out of just getting out of high school. You know, you don't realize when you're in college how bad the economy is other than because you can find a part time job, and fortunately school was a little cheaper back in the early 80s than it is today. But, but I remember it being pretty tough for my parents and the family farm. The second one is August 2000 in the January 2002, about 18 months there, and that was the calm meltdown.

Speaker Change: The third one, July of 81 to June of 83, was the longest period. I remember that. I was just out in college, just getting out of high school. You know, you don't realize when you're in college how bad the economy is.

Daniel L. Florness: You know, you don't realize when you're in college how bad the economy is, other than because you can find a part-time job. And fortunately, school was a little cheaper back in the early 80s than it is today. But I remember it being pretty tough for my parents and the family farm.

Speaker Change: I can find a part-time job, and fortunately school was a little cheaper back in the early 80s than it is today. But I remember it being pretty tough for my parents and the family farm.

Daniel L. Florness: The second one is August 2000 to January 2002, about 18 months there, and that was the dot-com meltdown. And from a duration standpoint, the third one is right now. And that was the 16 months that so it's 19 months, 18 months, and then 16 months duration before we had a blip. But you can see all these periods would have impacted Fastenal negatively, every one of these eight that we cite, and some were severe, some were long in duration, the early 80s was both.

Speaker Change: The second one is August 2000 to January 2002, about 18 months there and that was the dot-com meltdown.

Dan Florness: And from a duration standpoint, the third one is right now, and that was the 16 months that, so it's 19 months, 18 months, and then 16 months duration before we had a blip. But you can see all these periods would have impacted fast non negatively; every one of these eight that we cite, and some were severe, some were long in duration. Early 80s was both. I'll let the listener conclude on what you think that should mean to an industrial distributor.

Speaker Change: and from a duration standpoint the third one is right now and that was the 16 months that so it's 19 months 18 months and then 16 months duration before we had a blip

Speaker Change: But you can see all these periods would have impacted Fastenal negatively, every one of these eight that we cite, and some were severe, some were long in duration. Early 80s was both.

Daniel L. Florness: I'll let the listener conclude on what you think that should mean to an industrial distributor. Internally, we say, okay, nobody jumps out the window, let's focus on what we're doing to add business. Let's focus on what we're doing to grow the business, and for that customer that's business is down, support the hell out of Page 5, 107 signings in the second quarter, and active sites finished at 1934. We're approaching that 2000 active sites, 12% above where we were a year ago.

Speaker Change: I'll let the listener conclude on what you think that should mean to an industrial distributor. Internally, we say, okay, nobody jump out the window. Let's focus on what we're doing to add business.

Dan Florness: Internally, we say, "okay, nobody jump out the window." Let's focus on what we're doing to add business. Let's focus on what we're doing to grow the business, and for that customer that's business down, support the hell out of them.

Speaker Change: Let's focus on what we're doing to grow the business and for that customer that's business down support the hell out of them

Dan Florness: Page five, 107 signings in the second quarter. And active sites finished at 1934, so we're approaching that 2000 active on sites. This 12% above where we were a year ago. And we grew low single digits; a lot of our older on sites are negative right now. If you have the bulk of a customer's business and their business is down 10, 20, 30, 40%. Our revenue will follow suit. If it's all young fasters, it follows suit and magnitude.

Speaker Change: Page 5. 107 signings in the second quarter.

Speaker Change: And active sites finished at 1934, so we're approaching that 2000 active onsites, 12% above where we were a year ago.

Daniel L. Florness: And we grew low single digits. A lot of our older on-sites are negative right now. If you have the bulk of a customer's business and their business is down 10, 20, 30, 40%, our revenue will follow suit. If it's OEM fasteners, it follows suit in magnitude. If it's MRO, it follows suit directionally. FMI Technology.

Speaker Change: And we grew low single digits. A lot of our older onsites are negative right now.

Speaker Change: If you have the bulk of a customer's business and their business is down 10, 20, 30, 40 percent, our revenue will follow suit. If it's OEM fasters, it follows suit in magnitude. If it's MRO, it follows suit directionally.

Dan Florness: If it's MRO, it follows suit directionally FMI technology. When I stepped into this role in 2015, I'm ever seen to the group. In 2014, we signed 49 devices a day, and we frankly pulled way too many out. Two things we need to do. We have to stop pulling out 20% plus of our install base. And we have to grow that 49 a day to 100 a day, and we need the infrastructure to do it. And we slowly built it, and slowly built it. 7188 devices in the first in the second quarter, that's 112 per day.

Daniel L. Florness: When I stepped into this role in 2015, I remember saying to the group, In 2014, we signed 49 devices a day, and we frankly pulled way too many out. There are two things we need to do. We have to stop pulling out 20% plus of our installed base. And we have to grow that 49 a day to 100 a day, and we need the infrastructure to do it. And we slowly built it and slowly built it. 7188 devices in the first quarter. That's 112 calories per day.

Speaker Change: FMI Technology

Speaker Change: When I stepped into this role in 2015, I remember saying to the group, in 2014, we signed 49 devices a day, and we frankly pulled way too many out. There's two things we need to do.

Speaker Change: We have to stop pulling out 20% plus of our install base.

Speaker Change: And we have to grow that 49 a day to 100 a day, and we need the infrastructure to do it. And we've slowly built it and slowly built it. 7,188 devices in the second quarter, that's 112 per day.

Dan Florness: Our install base is now 119,000 weighted devices, an 11% increase from last year. So we're taking market share, we're planting flags, and we're making the business more resilient and efficient. And an interesting thing happens: a lot of customers love the technology because they believe in their facility; it steps up their internal game. Because when they see the OEM fasteners in this con bond bin that has RFID chips, and it's not messy, it's not chaotic, it's well managed, maybe you should do that throughout the production line. Maybe you should do that in a bunch of places, and it challenges everybody in the facility to step up their game, and that includes fast and all.

Daniel L. Florness: Our install base is now 119,000 weighted devices, an 11% increase from last year. So we're taking market share, we're planting flags, and we're making the business more resilient and efficient. And an interesting thing happened.

Speaker Change: Our install base is now 119,000 weighted devices, an 11% increase from last year. So we're taking market share, we're planting flags, and we're making the business more resilient and efficient. An interesting thing happens.

Daniel L. Florness: A lot of customers love the technology because it steps up their internal game. Because when they see the OEM fasteners in this Kanban bin that has RFID chips, and it's not messy, it's not chaotic, it's good, it's well managed. Maybe you should do that throughout production.

Speaker Change: A lot of customers love the technology because they believe in their facility. It steps up their internal game.

Speaker Change: Because when they see the OEM fasteners in this Kanban bin that has RFID chips, and it's not messy, it's not chaotic, it's well, it's well managed.

Daniel L. Florness: Maybe you should do that in one sort of place, and it challenges everybody in the facility to step up their game, and that includes: So in the we, about 42% of our sales are now going through FMI technology. And earlier I mentioned the impact of the economy. I'll share a few statistics that we get. One thing with FMI, you get a lot of statistics on what's going on all these things.

Speaker Change: Maybe you should do that throughout the production line. Maybe you should do that in a bunch of other places. And it challenges everybody in the facility to step up their game. And that includes Fastenal.

Dan Florness: So in the, we about 42% of our sales are now going through an FMI technology.

Speaker Change: So in the we about 42% of our sales are now going through an FMI technology.

Dan Florness: And earlier I mentioned the impact of the economy. I'll share a few statistics that we get one thing with FMI. You get a lot of statistics on what's going through all these things. So in our fast stock, that's where we're going out with an Android device that we're scanning bins. And we're managing it with a combination of technology and labor. In January of 2024, we did 16,387 orders per day through scanning technology. In our average order was $224. I already shared that from February to March, it dropped from 200. It was 225 in February; it dropped at 216 in March.

Speaker Change: And earlier I mentioned the the impact of the economy. I'll share a few statistics that we get. One thing with FMI, you get a lot of statistics on what's going through all these things.

Daniel L. Florness: So in our fast stock, and that's where we go out with an Android device that we're scanning bins, and we're managing it with a combination of technology and labor. In January of 2024, we did 16,387 orders per day. [inaudible] scanning technology; our average order was $224. I already shared that from February to March, it dropped from 200, it was 225 in February, it dropped to 216 in March. About 60% of that was volume, while 40% of that was price. Since then, it's been 216, 214, and 217.

Speaker Change: So in our fast stock, and that's where we're going out with an Android device that we're scanning bins And we're managing it with a combination of technology and labor

Daniel L. Florness: So our dollars per order are down, about $7 from 224. I didn't calculate the percentage here. So I apologize for that.

Speaker Change: In January of 2024, we did 16,387 orders per day.

Speaker Change: [inaudible]

Speaker Change: Scanning technology.

Speaker Change: In our average order was $224.

Speaker Change: I already shared that from February to March it dropped from 200 it was 225 in February it was it dropped to 216 in March.

Dan Florness: About 60% of that was volume; about 40% of that was priced. Since then, it's been 216, 214, 217. So our dollars per order is down. About $7 from 224. I didn't calculate the percentage here, so I apologize for that. But our orders per day have grown to 17,640 because we're deploying, we're deploying, we're deploying. So we have 1,253 more orders per day, a seven-and-a-half percent increase.

Speaker Change: About 60% of that was volume while 40% of that was price.

Speaker Change: Since then, it's been $216, $214, $217. So our dollars per order is down about $1.

Speaker Change: About $7 from 224. I didn't calculate the percentage here, so I apologize for that.

Daniel L. Florness: But our orders per day have grown to 17,640 because we're deploying, we're deploying, we're deploying. So we have 1,253 more orders per day, a seven and a half percent increase. Interestingly enough, when I look at our customer acquisition, we have a number we've always tracked, and it's our core account.

Speaker Change: But our orders per day have grown to 17,640 because we're deploying, we're deploying, we're deploying.

Speaker Change: So we have 1,253 more orders per day, a 7.5% increase. Interestingly enough, when I look at our customer acquisition, we have a number we've always tracked, and it's our core accounts.

Dan Florness: Interestingly enough, when I look at our customer acquisition, we have a number we've always tracked. And it's our core accounts. It's maybe more meaningful statistics when we were branch-based and opening branches. But last year, our core accounts, with some of the chaos and things we were doing, and some execution missteps and some intentional steps, are cores per per day from January to June, we're down about 4%. This year, they're up about seven. Part of that is us working through some indigestion. Part of that is Jeff and our sales team getting traction. And part of it is just overall execution by everybody supporting them.

Daniel L. Florness: It's It's maybe a more meaningful statistic when we were branch based and opening branches. But last year, our core accounts, with some of the chaos and things we were doing and some execution missteps, and some intentional steps, cores per day from January to June were down about 4% This year, they're up about seven. Part of that is us working through some indigestion, part of that is Jeff and our sales team getting traction, and part of it is just overall execution by everybody supporting them.

Speaker Change: It was maybe more meaningful a statistic when we were branch based and opening branches, but last year our core accounts with some of the chaos and things we were doing and some execution missteps and some intentional.

Speaker Change: Steps.

Speaker Change: Our cores per day from January to June were down about four percent.

Speaker Change: This year they're up about seven.

Speaker Change: Part of that is is us working through some indigestion. Part of that is Jeff and our sales team getting traction. And part of it is just overall execution by everybody supporting them.

Dan Florness: But bottom line is, it's $217 every time we scan a bin and not 224, but we're scanning seven and a half percent more bins.

Daniel L. Florness: But the bottom line is, it's $217 every time we scan a bin and not $224, but we're scanning 7.5% more bins. If I look at vending and I look at vending machines, I'm not looking at fast bins because it's not mature enough to really look at the data because it moves around too much because we're deploying so fast. But we have a lot of vending machines out there in January. Now, this is not an order number.

Speaker Change: But bottom line is, it's $217 every time we scan a bin and not $224, but we're scanning 7.5% more bins.

Dan Florness: If I look at vending, and I look at vending, I'm not looking at fast bin because it's not mature enough to really look at the data because it moves around too much because we're deploying so fast. But we have a lot of any machines out there. In January, now this is not an order number; this is a monthly number. In January, we did $1,578 per weighted device per day. And recall, when we started vending years ago, and I'm old enough, and I've been around here a long enough to remember those days, we talked about $2,000 when we talked about it with the analyst community.

Speaker Change: If I look at vending, and I look at vending, I'm not looking at fast bin because it's not mature enough to really look at the data because it moves around too much because we're deploying so fast.

Daniel L. Florness: This is a monthly number. In January, we did $1,578 per weighted device per day. And I recall when we started vending years ago, and I'm old enough, and I've been around here long enough to remember those days. We talked about $2,000 when we talked about it with the analyst community; we talked about where we could get that. We started in the less than 1000 category; we got it up into that 1000 to 1100, and we were stuck there for the longest time.

Speaker Change: But we have a lot of vending machines out there.

Speaker Change: In January , now this is not an order number, this is a monthly number, in January we did $1,578 per weighted device per day.

Speaker Change: And recall when we started vending years ago, and I'm old enough and I've been around here long enough to remember those days, we talked about

Dan Florness: We talked about where can we get that to? We started in the less than 1,000 category. We got it up into that 1,000 to 1,100, and we were stuck there for the longest time. And I have to say our teams and our FMI teams that support them, led by Jeff Hicks, have done a wonderful job of challenging and optimizing those machines over time that now we're doing close to 1,600. But we didn't do close to 1,600 in June. We did 1,454 per device. So about $124 less, about almost 8% less revenue per device. That's the economy.

Speaker Change: $2,000 when we when we talked about it with the analyst community, we talked about where can we get that to?

Speaker Change: We started in the less than 1,000 category, we got it up into that 1,000 to 1,100 and we were stuck there for the longest time. And I have to say, our teams and our FMI teams that support them, led by Jeff Hicks, have done a wonderful job.

Daniel L. Florness: And I have to say, our teams and our FMI teams that support them, led by Jeff Hicks, have done a wonderful job, challenging and optimizing those machines over time so that now we're doing close to 1600. But we didn't do close to 1600. In June, we did 1454 per device, so about $124 less, about almost 8% less revenue per device. That's the economy. Because we've added more devices, as I mentioned, our FMI technology is up about 11 over 11% from a year ago.

Speaker Change: Challenging and optimizing those machines over time that now we're doing close to 1600.

Speaker Change: But we didn't do close to 1,600 in June . We did 1,454.

Speaker Change: per device.

Speaker Change: So, about $124 less.

Speaker Change: about about almost 8% less revenue.

Dan Florness: Because we've added more devices.

Speaker Change: per device. That's the economy.

Speaker Change: because we've added more devices. As I mentioned, our FMI technology is up about 11, over 11 percent from a year ago, but the customer needs fewer things. One advantage to Fastenal in the marketplace

Dan Florness: As I mentioned, our FMI technology is about 11% over 11% from a year ago. But the customer needs fewer things. One advantage to fast know on the marketplace is by having our type of supply chain. Not only are we a great supplier and supply chain partner to our customers. We can help them dial their expenses down faster when their business slows down, and it just doesn't pile up because everything's on autopilot. And I believe that makes us a better partner.

Daniel L. Florness: But the customer needs fewer things. One advantage to Fastenal in the marketplace is that we have our type of supply chain. Not only are we a great supplier and supply chain partner to our customers, but we can help them dial their expenses down faster when their business slows down. And it just doesn't pile up because everything's on autopilot.

Speaker Change: is by having our type of supply chain, not only are we a great supplier and supply chain partner to our customers,

Speaker Change: We can help them dial their expenses down faster when their business slows down and it just doesn't pile up because everything's on autopilot.

Daniel L. Florness: And I believe that makes us a better partner. E-business rose about 25%. The e-procurement side is really the driver of that. Our e-commerce side is okay. It's not great, but some of the things we're doing with AI are intended to improve that over time on the unplanned spend side. Finally, on digital footprint 59.4%, that's taking all of our e-commerce, all of our FMI, eliminating the double counting and saying what percent of our business is going through one of those two. It was 59.4%.

Speaker Change: And I believe that makes us a better partner.

Dan Florness: E-business rose about 25%. The e-procurement side is really the driver of that. Our e-commerce side is okay. It's not great. But some of the things we're doing with AI is intended to improve that over time on the unplanned spend side. Finally, on digital footprint, 59.4%. That's taking all of our e-commerce, all of our FMI, eliminating the double counting and saying what percent of our business is going through one of those two. It was 59.4% in the second quarter; actually, in June, it hit 60%. We had expected that maybe we'd get about 66% this year. We now think it's about 63.

Speaker Change: eBusiness rose about 25%. The e-procurement side is really the driver of that. Our e-commerce side is okay. It's not great, but some of the things we're doing with AI is intended to improve that over time on the unplanned spend side.

Speaker Change: Finally, on digital footprint, 59.4%. That's taking all of our e-commerce.

Speaker Change: All of our FMI, eliminating the double counting and saying what percent of our business is going through one of those two, it was 59.4% in the second quarter, actually in June , it hit 60%.

Daniel L. Florness: In the second quarter, actually in June, it hit 60%. We'd expected that maybe we'd get about 66% this year. But we now think it's about 63.

Speaker Change: We'd expected that maybe we'd get about 66% this year. We now think it's about 63. And that's not because we're not

Holden Lewis: And that's not because we're not inquiring customers; it shows up in our numbers. With that, I'll set up and turn it over to Holden. Great. Thanks, Dan. And good morning, everyone.

Dan Florness: And that's not because we're not acquiring customers; it's because customers are spending lots, and it shows up in our numbers.

Speaker Change: Acquiring customers is because customers are spending less and it shows up in our numbers.

Holden Lewis: With that, I'll set up and turn to hold them.

Holden Lewis: Great, thanks Dan, and good morning everyone. I will begin my comments on slide six. I think Dan covered the current business conditions, so I won't add a lot there, but I can add some additional color from regional leadership. We continue to experience sluggish business activity that has persisted long enough at this point to be spurring an uptick in layoffs and shift reductions. There were more and longer shutdowns around the July 4th holiday; some of those, frankly, are continuing. And an overall industrial production continues to exhibit modest declines, as we saw in April and May, with the key machinery component being weaker than the overall index.

Speaker Change: With that, I'll shut up and turn it over to Holden. Great. Thanks, Dan. And good morning, everyone.

Holden Lewis: I will begin my comments on slide six. I think Dan covered the current business conditions. I won't add a lot there, but I can add some additional color from regional leadership. We continue to experience sluggish business activity that has persisted long enough at this point to be spurring an uptick in layoffs and shift reduction. There were more and longer shutdowns around the July 4th holiday.

Holden Lewis: I will begin my comments on slide six.

Holden Lewis: I think Dan covered the current business conditions, so I won't add a lot there, but I can add some additional color from regional leadership. We continue to experience sluggish business activity that has persisted long enough at this point to be spurring an uptick in layoffs and shift reductions.

Holden Lewis: Some of those, frankly, are continuing, and overall industrial production continues to exhibit modest declines, as we saw in April and May, with the key machinery component being weaker than the overall index, and we're feeling that. If I look at our business, total manufacturing grew 2.7%. Our fastener product line was down 3%, with contraction in MRO and OEM products. All other end markets declined 1%, reflecting continued contraction in non-residential construction and reseller end markets.

Holden Lewis: There were more and longer shutdowns around the July 4th holiday. Some of those, frankly, are continuing, and overall industrial production continues to exhibit modest declines, as we saw in April and May, with the key machinery component being weaker than the overall index, and we're feeling that.

Holden Lewis: And we're feeling that. If I look at our business, total manufacturing grew 2.7%; our fastener product line was down 3% with contraction in MRO and OEM products. All other end markets declined 1%, reflecting continued contraction and non-residential construction and reseller end markets. This was partly offset by strong growth in warehousing customers, which combined with good FMI installs, went a long way to driving our 7.1% growth in safety products. The profile of the second quarter in terms of performance by end market product and customer size was largely unchanged from the preceding quarter. We did have negative pricing in the period of 30 to 60 basis points.

Speaker Change: If I look at our business, total manufacturing grew 2.7%, our fastener product line was down 3% with contraction in MRO and OEM products.

Speaker Change: All other end markets declined 1%, reflecting continued contraction in non-residential construction and reseller end markets.

Holden Lewis: This was partly offset by strong growth in warehousing customers, which, combined with good FMI installs, went a long way to driving our 7.1% growth in safety products. The profile of the second quarter in terms of performance by end market, product, and customer size was largely unchanged from the preceding quarter. We did have negative pricing in the period of 30 to 60 basis. Fastener prices remain down, which is not new, but we also experienced some slippage in price from non-fastener products. I don't want to overstate the impact. I mean, our price cost was very modestly positive in the second quarter of 2024. However, it did ease from where it was in the first quarter of 2024.

Speaker Change: This was partly offset by strong growth in warehousing customers, which combined with good FMI installs, went a long way to driving our 7.1% growth in safety products. The profile of the second quarter in terms of performance by end market, product and customer size was largely unchanged from the preceding quarter.

Speaker Change: We did have negative pricing in the period of 30 to 60 basis points.

Holden Lewis: Fastener prices remained down, which is not new, but we also experienced some slippage and price from non-fastener products. I don't want to overstate the impact. I mean, our price cost was very modestly positive in the second quarter of 2024. However, it did ease from where it was in the first quarter of 2024. That's partly from comparisons. And the softer market has made things a bit more challenging. Even so, we believe we can improve our own discipline in this area and intend to address the matter in the third quarter of 2024. Setting aside the cycle, we are increasingly encouraged over efforts to accelerate customer acquisition.

Speaker Change: Fastener prices remain down, which is not new, but we also experienced some slippage in price from non-fastener products.

Speaker Change: I don't want to overstate the impact. I mean, our price cost was very modestly positive in the second quarter of 2024. However, it did ease from where it was in the first quarter of 2024. That's partly from comparisons.

Holden Lewis: That's partly because of comparisons, and the softer market has made things a bit more challenging. Even so, we believe we can improve our own discipline in this area and intend to address the matter in the third quarter of 2024. Setting aside the cycle, we are increasingly encouraged by efforts to accelerate customer acquisition. The first half of 2024 has produced strong onsite and FMI signings, and a highly successful customer. We are also experiencing accelerating growth now in the double digits and improved mix in the number of our national account contractors.

Speaker Change: And the software market has made things a bit more challenging. Even so, we believe we can improve our own discipline in this area and intend to address the matter in the third quarter of 2024.

Speaker Change: Setting aside the cycle, we are increasingly encouraged over efforts to accelerate customer acquisition. The first half of 2024 has produced strong onsite and FMI signings and a highly successful customer expo.

Holden Lewis: The first half of 2024 has produced strong onsite and FMI signings and a highly successful customer expo. We are also experiencing accelerating growth now in the double digits and improved mix in the number of our national account contracts. Regional leadership attributes these improvements versus 2023 to better alignment between our teams, a sharpened focus on selling, and the relative stability of the business environment, which is allowing teams to focus on winning business. Given our traditional lack of forward visibility, it is unclear when business activity will improve. It's also unclear how impactful holiday shutdowns or the hurricane in Texas will be on July.

Speaker Change: We are also experiencing accelerating growth now in the double digits and improved mix in the number of our national account contracts.

Holden Lewis: Regional leadership attributes these improvements versus 2023 to better alignment between our teams, a sharpened focus on selling, and the relative stability of the business environment, which is allowing teams to focus on winning business. However, given our traditional lack of forward visibility, it is unclear when business activity will improve. It's also unclear how impactful holiday shutdowns or the hurricane in Texas will be in July. Even so, barring further erosion and macro conditions, the strong signing activity of the first half of 2024 should benefit sales trends in the second half of 2024 and into 2025. Now to slide seven.

Speaker Change: Regional leadership attributes these improvements versus 2023 to better alignment between our teams, a sharpened focus on selling, and the relative stability of the business environment which is allowing teams to focus on winning business.

Speaker Change: Given our traditional lack of forward visibility, it is unclear when business activity will improve.

Speaker Change: It's also unclear how impactful holiday shutdowns or the hurricane in Texas will be on July . Even so, barring further erosion and macro conditions, the strong signings activity of the first half of 2024 should benefit sales trends in the second half of 2024 and into 2025.

Holden Lewis: Even so, barring further erosion and macro conditions, the strong signings activity of the first half of 2024 should benefit sales trends in the second half of 2024 and in 2025.

Holden Lewis: Now to slide 7. Operating margin in the second quarter of 2024 was 20.2%, down 80 basis points year to year. Recall in the April earnings call that we discussed a likely impact on the second quarter of 2024 from expenses related to our customer expo and actions taken to support certain warehousing customers in anticipation of additional future business.

Holden Lewis: Operating margin in the second quarter of 2024 was 20.2%, down 80 basis points year to year. Recall in the April earnings call that we discussed a likely impact in the second quarter of 2024 from expenses related to our customer expo and actions taken to support certain warehousing customers in anticipation of additional future business. The combined impact was roughly 30 basis points in the second quarter of 2024, as expected. Some modest impact will carry into July, but the effect on margins in the third quarter of 2024 should be well below what we incurred in the second.

Speaker Change: Now to slide seven.

Speaker Change: Operating margin in the second quarter of 2024 was 20.2%, down 80 basis points year-to-year.

Speaker Change: Recall in the April earnings call that we discussed a likely impact in the second quarter of 2024 from expenses related to our customer expo and actions taken to support certain warehousing customers in anticipation of additional future business.

Holden Lewis: Business. The combined impact was roughly 30 basis points in the second quarter of 2024, as expected. Some modest impact will carry into July, but the effect on margins in the third quarter of 2024 should be well below what we incurred in the second quarter. Gross margin in the second quarter of 2024 was 45.1%, down 40 basis points from the year-ago period. This is primarily due to product and customer mix. S DNA was 24.9% of sales in the second quarter of 2024, an increase for 24.6% from the year-ago period. Total S DNA was up 3% due to de-leveraging of employee related expenses, customer expo expenses, higher costs for selling related vehicles as we refresh the fleet, and higher general insurance costs.

Speaker Change: The combined impact was roughly 30 basis points in the second quarter of 2024, as expected. Some modest impact will carry into July , but the effect on margins in the third quarter of 2024 should be well below what we incurred in the second quarter.

Holden Lewis: Gross margin in the second quarter of 2024 was 45.1%, down 40 basis points from the year-ago period. This is primarily due to product and customer. SG&A was 24.9% of sales in the second quarter of 2024, an increase of 24.6% from the year-ago period. Total SG&A was up 3% due to deleveraging of employee-related expenses, customer expo expenses, higher costs for selling related vehicles as we refresh the fleet, and higher general insurance costs.

Speaker Change: Gross margin in the second quarter of 2024 was 45.1% down 40 basis points from the year ago period. This was primarily due to product and customer mix.

Speaker Change: SG&A was 24.9% of sales in the second quarter of 2024, an increase for 24.6% from the year-ago period.

Speaker Change: Total SG&A was up 3% due to deleveraging of employee-related expenses, customer expo expenses, higher costs for selling related vehicles as we refresh the fleet, and higher general insurance costs.

Holden Lewis: We continue to believe we are effectively spending where we need to spend to support future growth and scrimping where we can scrimp, and that as growth picks up, we will leverage the PNL. Putting everything together, we reported second quarter 2024 EPS at 51 cents. Down 2% for 52 cents in the second quarter of 2023.

Speaker Change: We continue to believe we are effectively spending where we need to spend to support future growth and scrimping where we can scrimp, and that as growth picks up, we will leverage the P&L. Putting everything together, we reported second quarter 2024 EPS at $0.51, down 2% from $0.52 in the second quarter of 2023.

Holden Lewis: We continue to believe we are effectively spending where we need to spend to support future growth and scrimping where we can scrimp, and that as growth picks up, we will leverage the P&L. Putting everything together, we reported second-quarter 2024 EPS at 51 cents, down 2% for 52 cents in the second quarter of 2023. Now turning to slide eight.

Holden Lewis: Turning to slide 8, we generated 258 million in operating cash in the second quarter of 2024, or 88% of net income. While below the prior period, when we were deliberately reducing layers of inventory, the current year's conversion rate is above historical second quarter rates. With good cash generation and a soft demand environment, we continued to carry a conservatively capitalized balance sheet, with debt being 6.3% of total capital, down from 9.4% of total capital at the end of the second quarter of 2023. Working capital dynamics were consistent with recent trends. Accounts receivable were up 2.8%, driven primarily by sales growth and a shift towards larger customers, which tend to have longer terms. Inventories were down 3.9%, which continues to reflect primarily the softer marketplace, the reduction of inventory layers built a year ago to manage supply constraints, and modest inventory deflation.

Holden Lewis: We generated $258 million in operating cash in the second quarter of 2024, or 88% of net income. While below the prior period, when we were deliberately reducing layers of inventory, the current year's conversion rate is above historical second-quarter rates. With good cash generation and a soft demand environment, we continue to carry a conservatively capitalized balance sheet with debt being 6.3% of Total Capital, down from 9.4% of total capital at the end of the second quarter of fiscal year 2012.

Speaker Change: Now turning to slide 8.

Speaker Change: We generated $258 million in operating cash in the second quarter of 2024, or 88% of net income.

Speaker Change: While below the prior period, when we were deliberately reducing layers of inventory, the current year's conversion rate is above historical second quarter rates.

Speaker Change: With good cash generation and a soft demand environment, we continue to carry a conservatively capitalized balance sheet, with debt being 6.3%.

Speaker Change: of Total Capital.

Speaker Change: Down from 9.4% of total capital at the end of the second quarter of 23.

Holden Lewis: Working capital dynamics were consistent with recent trends. Accounts receivable were up 2.8%, driven primarily by sales growth and a shift towards larger customers, which tend to have longer terms. Inventories were down 3.9%, which continues to reflect primarily the softer marketplace, the reduction of inventory layers built a year ago to manage supply constraints, and modest inventory deflation.

Speaker Change: Working capital dynamics were consistent with recent trends. Accounts receivable were up 2.8 percent, driven primarily by sales growth and a shift towards larger customers which tend to have longer terms.

Speaker Change: Inventories were down 3.9% which continues to reflect primarily the softer marketplace, the reduction of inventory layers built a year ago to manage supply constraints, and modest inventory deflation.

Holden Lewis: While we will continue to focus on continuous improvement as it relates to inventory management, the rate of decline in our inventory balances will likely moderate going forward as the process of right-sizing our stock is now largely complete. Net capital spending in the second quarter of 2024 was 52.6 million, largely flat compared with 53.9 million in the second quarter of 23. For the full year, we have increased our anticipated net capital spending to a range of $235 million to We anticipate higher spending for vending devices where our mix of signings has been more heavily weighted towards higher cost and scaled units.

Holden Lewis: While we will continue to focus on continuous improvement as it relates to inventory management, the rate of decline in our inventory balances will likely moderate going forward as the process of right-sizing our stock is now largely complete. Net capital spending in the second quarter of 2024 was 52.6 million, largely flat was 53.9 million in the second quarter of 23. For the full year, we have increased our anticipated net capital spending to a range of 235 million, which is up 10 million from the prior range. We anticipate higher spending preventing devices where our mix of signings has been more heavily weighted towards higher cost and scaled units.

Speaker Change: While we will continue to focus on continuous improvement as it relates to inventory management, the rate of decline in our inventory balances will likely moderate going forward as the process of right-sizing our stock is now largely complete.

Speaker Change: Net capital spending in the second quarter of 2024 was $52.6 million. Largely flat was $53.9 million in the second quarter of 2023. For the full year, we have increased our anticipated net capital spending to a range of $235 million to $255 million, which is up $10 million from the prior range.

Speaker Change: We anticipate higher spending for vending devices, where our mix of signings has been more heavily weighted towards higher cost and scaled units.

Holden Lewis: The projected increase in net capital spending for the full year of 2024 is driven by higher outlays for how automation and capacity, the substantial completion of an upgraded distribution center and new top and increase in FMI to spend in FMI spend to support increased signings and higher information technology purchases.

Holden Lewis: The projected increase in net capital spending for the full year of 2024 is driven by higher outlays for hub automation and capacity, the substantial completion of an upgraded distribution center in Utah, an increase in FMI spend to support increased signings, and higher information technology purchases. Now, before turning to Q&A, I want to offer a higher-level perspective on the quarter. The market's tough, and the various cyclical forces at play are impacting our growth and profitability. That's not something we can control.

Speaker Change: The projected increase in net capital spending for the full year of 2024 is driven by higher outlays for hub automation and capacity, the substantial completion of an upgraded distribution center in Utah, an increase in FMI spend to support increased signings, and higher information technology purchases.

Holden Lewis: Now, before turning to Q&A, I want to offer a higher level perspective on the quarter. The market's tough, and the various cyclical forces at play are impacting our growth and profitability. That's not something we control. What we do control is our ability to grow share in the marketplace. A year ago, we weren't as effective as we believe we could be. Today, it's becoming increasingly clear that the changes we made in leadership approach and focus are favorably impacting our ability to win new costs. customers. Progress is not always a straight line, of course, but we believe we will build on the successes we've achieved in the first half of 2024, and that it brightens our short and intermediate-term outlook regardless of the cycle.

Speaker Change: Now, before turning to Q&A, I wanted to offer a higher-level perspective on the quarter. The market's tough, and the various cyclical forces at play are impacting our growth and profitability.

Holden Lewis: What we do control is our ability to grow our share in the marketplace. A year ago, we weren't as effective as we believed we could be. Today, it's becoming increasingly clear that the changes we made in leadership, approach, and focus are favorably impacting our ability to win new customers. Progress is not always a straight line, of course, but we believe we will build on the successes we achieved in the first half of 2024 and that it brightens our short and intermediate-term outlook, regardless of the cycle.

Speaker Change: That's not something we control. What we do control is our ability to grow share in the marketplace. A year ago, we weren't as effective as we believed we could be. Today, it's becoming increasingly clear that the changes we made in leadership, approach, and focus are favorably impacting our ability to win new customers.

Speaker Change: Progress is not always a straight line of course but we believe we will build on the successes we've achieved in the first half of 2024 and that it brightens our short and intermediate term outlook regardless of the cycle. Of course we're most excited for what it means for our growth and activity levels among our existing customer base stabilizes.

Holden Lewis: Of course, we're most excited for what it means for our growth and activity levels among our existing customer base stabilizes.

Dan Florness: Before we turn it over to Q&A, I'm going to pass it back to Dan. Thanks, Holden. And early on this morning, as you all know, we put out our earnings release. And just before market open, we put out a second release.

Holden Lewis: Of course, we're most excited about what it means for our growth and activity levels among our existing customer base. Before we turn it over to Q&A, I'm going to pass it back to Dan. Thanks, Holden.

Speaker Change: Before we turn it over to Q&A, I'm going to pass it back to Dan.

Daniel L. Florness: Earlier this morning, as you all know, we put out our earnings release. And just before the market opened, we put out a second release. Normally, we would have put that release out after the market closed, but it's a Friday.

Speaker Change: Earlier this morning, as you all know, we put out our earnings release.

Daniel L. Florness: And we didn't want to. I'm not a politician. I don't bury news for the weekend. I aspire to be a leader, and we put out news, good and bad. And this is good news. I mentioned earlier the transition that we had with Jeff Watts stepping into the Chief Sales Officer role. One thing I've learned from Jeff being in that role, first off, the sales leaders, who've always had a great relationship with our finance team, with our HR team, with technology, with supply chain. But what he did is he took a big step in the last year, year and a half, and said, I want to embrace more. And I want to learn more.

Daniel L. Florness: And just before market open, we put out a second release.

Dan Florness: Normally, we would put that release out after the market closed, but it's a Friday, and we didn't want to. I'm not a politician. I don't bury news into the weekend. I aspired to be a leader, and we put news out. Good and bad. And this is good news. I mentioned earlier about the transition that we had with Jeff Watts stepping into the Chief Sales Officer role. One thing I've learned from Jeff being in that role: first off, the sales leaders have stepped up their game to support Jeff in that expanded role. But of equal importance, maybe more important.

Daniel L. Florness: Normally, we would have put that release out after the market closed, but it's a Friday, and we didn't want to... I'm not a politician, so I don't bury news into the weekend. I aspire to be a leader, and we put news out, good and bad, and this is good news.

Daniel L. Florness: I mentioned earlier about the transition that we had with Jeff Watts stepping into the Chief Sales Officer role. One thing I've learned from Jeff being in that role, first off, the sales leaders

Daniel L. Florness: have stepped up their game to support Jeff in that expanded role.

Dan Florness: Everybody else has embraced Jeff, and Jeff has embraced them back from the standpoint of he's not a salesperson trying to figure out his way outside of sales. He's a business leader who's always had a great relationship with our finance team, with our HR team, with technology, and with supply chain. But what he did is he took a big step in the last year, year and a half, and said, I want to embrace more, and I want to learn more. And he humbled himself to listen and learn. And he challenged some things back; as a result, we're a better organization.

Daniel L. Florness: But of equal importance, maybe more important, everybody else has embraced Jeff, and Jeff has embraced him back from the standpoint of he's not a salesperson trying to figure out his way outside of sales. He's a business leader.

Daniel L. Florness: who's always had a great relationship with our finance team, with our HR team.

Daniel L. Florness: with

Daniel L. Florness: And he humbled himself to listen and learn, and he challenged some things back. As a result, we're a better organization. And I'll give you an example.

Daniel L. Florness: Technology with Supply Chain.

Daniel L. Florness: So what he did is he took a big step in the last year, year and a half and said, I want to, I want to embrace more. And I want to, I want to learn more. And he humbled himself to listen and learn. And he challenged some things back, as a result, we're a better organization.

Dan Florness: And I'll give you an example. Tony Burstman is team will oversee the our supply chain and distribution. A number of years ago, and we're always doing this, we did a very significant reclass. And what that is, is you're deciding what the stack and distribution. And we remove some stuff. And when Tony stepped into that role, we all challenged them. But Jeff's continued to challenge them. But we all challenged them about, think about supply chain not as what we stock in distribution, a distribution center. Think about supply chain is how we get product to the customer and where we stage it.

Daniel L. Florness: Tony Bergman and his team will oversee our supply chain and distribution. A number of years ago, and we're always doing this, we did a very significant reclass. And what that is, is you're deciding what the stock and distribution is, and we get rid of some stuff.

Daniel L. Florness: And I'll give you an example. Tony Bergspan and his team will overseas our supply chain and distribution. A number of years ago, and we're always doing this, we did a very significant reclass. And what that is, is you're deciding what the stack and distribution.

Daniel L. Florness: And when Tony stepped into that role, we all challenged them, but Jeff continued to challenge them, but we all challenged them about the supply chain, not as what we stock in distribution, a distribution center. Think about the supply chain as well as how we get product to the customer and where we stage it. Because we'll be a better organization. I don't care if our inventory goes up or down in distribution.

Daniel L. Florness: And we removed some stuff. And when Tony stepped into that role, we all challenged him. But Jeff continued to challenge him. But we all challenged him about, think about supply chain, not as what we stock in distribution.

Daniel L. Florness: distribution center. Think about supply chain is how we get product to the customer and where we stage it. Because we'll be a better organization. I don't care if our inventory goes up or down in distribution. Holden cares about our total investment. So do our shareholders.

Dan Florness: Because we'll be a better organization. I don't care if our inventory goes up or down distribution. Holden cares about our total investment, so do our shareholders. But we really care about how to best serve our customer. And Tony went to work on it. And again, was challenged by a lot of people. So we're doing actually a do over reclass. And we're adding about 18,000 SKUs into distribution in the next six months or so. Between now and your end, it will probably add around 17 million of inventory to our balance sheet. Once in place, some of that will start to burn through.

Daniel L. Florness: Holden cares about our total investment. So do our shareholders. But we really care about how to best serve our customers, and Tony went to work on it.

Daniel L. Florness: but we really care about how to best serve our customer and Tony went to work on it and again was challenged by a lot of people so we're doing actually a do-over reclass

Daniel L. Florness: And again, it was challenged by a lot of people. So we're doing a do over reclass, and we're adding about 18,000 SKUs into distribution in the next in the next six months or so. Between now and year end, it will probably add around 17 million of inventory to our balance sheet. Once in place, some of that will start to burn through. We think that number will drop by about a third by March.

Daniel L. Florness: And we're adding about...

Daniel L. Florness: 18,000 SKUs

Daniel L. Florness: into distribution in the next in the in in the next six months or so. Between now and year end, it will probably add around 17 million of inventory to our balance sheet.

Daniel L. Florness: Once in place, some of that will start to burn through. We think that will drop by about a third by March and we think ultimately 18 months from now the net impact is zero because we're restaging, we're moving stuff around and we're normalizing the quantity on hand.

Dan Florness: We think that will drop by about a third by March. And we think ultimately 18 months from now, the net impact is zero because we're re-staging, we're moving stuff around, and we're normalizing the quantity on hand. We believe the annual improvement to cost a good is more than the initial investment in inventory, so that 17 million we think is worth about 20 because when you buy it that way, you're not buried, you're not scrambling; you buy it more effectively because you can decide where you're sourcing it as opposed to an emergency spend. From a branch perspective, not only will they have these 18,000 skews available, their workload will actually go down. We cut about 3 million POs a year at the branch and on-site level.

Daniel L. Florness: And we think ultimately, 18 months from now, the net impact will be zero because we're restaging, we're moving stuff around, and we're normalizing the quantity on hand. We believe the annual improvement in cost per unit is more than the initial investment in inventory. So that $17 million, we think is worth about $20 because when you buy it that way, you're not hurried, you're not scrambling, and you buy it more effectively because you can decide where you're sourcing it as opposed to an emergency.

Daniel L. Florness: We believe the annual improvement, the cost of goods.

Daniel L. Florness: is more than the initial investment in inventory. So that $17 million we think is worth about $20 because when you buy it that way, you're not hurried, you're not scrambling, you buy it more effectively because you can decide where you're sourcing it as opposed to an emergency spend.

Daniel L. Florness: From a brand perspective, not only will they have these 18,000 SKUs available, but their workload will actually go down. We cut about 3 million POs a year at the branch and onsite level, and 300,000 of those POs relate to this product.

Daniel L. Florness: From a branch perspective, not only will they have these 18,000 SKUs available,

Daniel L. Florness: Their workload will actually go down. We cut about 3 million POs a year at the branch and on-site level.

Dan Florness: 300,000 of those POs relate to this product, so we'll cut our PO workload by about 10% at the branch and on-site level and enhance our gross margin and our service to our customer at the same time. We think that's a winner.

Daniel L. Florness: 300,000 of those POs relate to this product. So we'll cut our PO workload by about 10% at the branch and on-site level.

Daniel L. Florness: So we'll cut our PO workload by about 10% at the branch and onsite level and enhance our gross margin and our service to our customers. At the same time, we think that's a winner. When I think about what Jeff's doing, a couple years ago, I really sat down with the board and said, you know, I'm turning 60 in November of 2023. You really have to be; you have to get to know our entire team better. I challenged them to, and we scheduled some field trips. We've been doing field trips for the last several years.

Daniel L. Florness: and enhance our gross margin and our service to our customer at the same time. We think that's a winner.

Dan Florness: When I think about what guests doing a few a couple years ago, I really sat down with the board and said, you know, I'm turning 60 November of 2023, you really have to be, you have to get to know our entire team better. I challenge them to we schedule some field trips. We've been doing field trips the last several years. I challenge them to come to our employee expo in December, our customer show in April, and beat our leaders. And I really ask them to get to know Jeff watch better, and we announced this morning that Jeff has been elevated to president of Fastenal. I'm excited for Jeff.

Speaker Change: When I think about what Jeff's doing, a couple years ago, I really sat down with the board and said, you know, I'm turning 60, November of 2023, you really have to be, you have to get to know our entire team better. I challenged them to, we scheduled some field trips, we've been doing field trips the last several years.

Daniel L. Florness: I challenged them to come to our employee expo in December, our customer show in April, and meet our leaders. And I really asked them to get to know Jeff Watts better. And we announced this morning that Jeff has been elevated to president of Fastenal. I'm excited for Jeff.

Speaker Change: I challenge them to come to our Employee Expo in December , our customer show in April , and meet our leaders.

Speaker Change: And I really asked them to get to know Jeff Watts better.

Speaker Change: We announced this morning that Jeff has been elevated to president of Fastenal. I'm excited for for Jeff. I'm more excited for Fastenal because my motivation is simply this. I should say our motivation is simply this.

Dan Florness: I'm more excited for fast and all because my motivation is simply this: should be our motivation is simply this. It's a means to grow faster, and I believe Jeff will help that happen. I also sat down with John Soderberg. I talked earlier about some of the things John's done and his team have done. It's related to fast, non-intelligence, not artificial intelligence. And I sat down with John, and I said, "John, Jeff and I are going to drive you crazy, and I apologize for that, but we're going to punch you from both sides." And we believe we could move even faster.

Daniel L. Florness: I'm more excited for Fastenal because my motivation is simply this, or I should say our motivation is simply this. It's a means to grow fast, and I believe Jeff will help that happen. I also sat down with John Soderbergh.

Speaker Change: It's a means to grow faster.

Daniel L. Florness: I talked earlier about some of the things John and his team have done as relates to fastenal intelligence, not artificial intelligence. And, and I sat down with John, and I said, John, Jeff and I are going to drive you crazy. And I apologize for that, but we're gonna punch you from both sides.

Speaker Change: I believe Jeff will help that happen. I also sat down with John Soderberg. I talked earlier about some of the things John's done and his team have done as it relates to Fastenal Intelligence, not Artificial Intelligence.

Speaker Change: And I sat down with John and I said, John ,

Daniel L. Florness: And we believe we can move even faster. And so I'm excited about everything. But Jeff, congratulations.

Speaker Change: Jeff and I are going to drive you crazy.

Speaker Change: And I apologize for that, but we're going to punch you from both sides, and we believe we can move even faster. And so I'm excited for everything, but Jeff, congratulations. John will try not to drive you too crazy. And to everybody else supporting Jeff and the organization, thank you. With that, we'll turn it over to questions.

Dan Florness: And so I'm excited for everything, but Jeff, congratulations. John, John will try not to read you too crazy, and to everybody else supporting Jeff in the organization. Thank you.

Daniel L. Florness: John, John, we'll try not to drive you too crazy. And to everybody else who is supporting Jeff and the organization. Thank you. With that, we'll turn it over to questions. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the list of participants using speaker equipment. It may be necessary to pick up your handset before pressing the star key.

Operator: With that, we'll turn over to questions.

Operator: Thank you.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question too. You may press star two if you would like to remove your question from the key.

Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Operator: Participants using speaker equipment may be necessary to pick up your hands that before pressing the star key. We ask that you please limit yourself to one question and one follow-up question.

Speaker Change: Participants, using speaker equipment, it may be necessary to pick up your handset before pressing the star key. We ask that you please limit yourself to one question and one follow-up question. One moment, please, while we poll for your questions.

Operator: One moment, please, while we pull for your questions.

Operator: Our first questions come from the line of Tommy Mall with Stevens. Please proceed with your questions. Good morning, and thank you for taking my questions. Morning. I wanted to start with a follow-up on the pricing commentary you provided. The deflation and fasteners has been ongoing for some time and, as well known, but the new news today, I believe, is in the safety category.

Operator: We ask that you please limit yourself to one question and one follow-up question. One moment, please, while we pull for your question. Our first questions come from the line of Tommy Moll with Stevens. Please proceed with your question. Good morning, and thank you for taking my questions. Good morning.

Speaker Change: Our first questions come from the line of Tommy Moll with Stevens. Please proceed with your questions.

Thomas Allen Moll: Good morning and thank you for taking my questions.

Thomas Allen Moll: I wanted to start with a follow-up on the pricing commentary you provided. Deflation in fasteners has been ongoing for some time and is well known. But the new news today, I believe, is in the safety category. So, I was just curious if you could give us any context for what you've seen there, and then when you referenced taking steps to be a little more disciplined in the coming quarter, if you could give any insight on that. Thank you.

Thomas Allen Moll: Morning.

Thomas Allen Moll: I wanted to start with a follow-up on the pricing commentary you provided. The deflation in fasteners has been ongoing for some time and is well known, but the new news today, I believe, is in the safety category.

Tommy Mall: So I was just curious if you could give us any context for what you've seen there, and then when you referenced taking steps to be a little more disciplined in the coming quarter, if you could give any insight on that. Thank you. Yeah. And again, bear in mind, I don't think it had a meaningful adverse impact in the second quarter. But we look at trends too, and the reality is our price cost was fairly neutral versus being somewhat positive last quarter, and I think the pricing in the marketplace was a contributor to that. As you indicated, I'm not overly concerned about the fastener site.

Speaker Change: So I was just curious if you could give us any context for what you've seen there and then when you when you referenced Taking steps to to be a little more disciplined in the coming quarter if you could give any insight on that. Thank you Yeah

Holden Lewis: Yeah, and again, bear in mind, I don't think it had a meaningful adverse impact in the second quarter. But we look at trends too, and the reality is our price cost was fairly neutral versus being somewhat positive last quarter, and I think the pricing in the marketplace was a contributor to that. As you indicated, I'm not overly concerned about the fastener side.

Speaker Change: Yeah, and again, bear in mind, I don't think it had a meaningful adverse impact in the second quarter.

Speaker Change: You know, but we look at trends too, and the reality is our price cost was fairly neutral versus being somewhat positive last quarter, and I think the pricing in the marketplace was a contributor to that.

Speaker Change: As you indicated, I'm not overly concerned about the fastener side. Price is down, but so is cost, and frankly, I think the organization's done a nice job managing those two dynamics in that product line, and the reality is we have a unique value proposition there, and that does make it easier.

Holden Lewis: Price is down, but so is cost, and frankly, I think the organization's done a nice job managing those two dynamics in that product line. And the reality is we have a unique value proposition there, and that does make it easier. But we also have a unique value proposition in Safe.

Holden Lewis: Price is down, but so is cost, and frankly, I think the organization's done a nice job managing those two dynamics in that product line. And the reality is we have a unique value proposition there, and that does make it easier. But we also have a unique value proposition in safety.

Speaker Change: But we also have a unique value proposition in safety.

Holden Lewis: Safety, and in light of that, we just, I just don't think we were as disciplined about, you know, how we were thinking about price in a challenging market in the safety world, and then I would say we weren't terribly disciplined in parts of our other products categories either. Now, when I think about how we address that, the first step is just to elevate the issue, and then I think Dan and I and Jeff and everybody involved in sales leadership have been raising the awareness of, as you're pursuing business in a soft market, we need to be fairly mindful of the solutions that we're bringing to the table.

Holden Lewis: And in light of that, I just don't think we were as disciplined about, you know, how we were thinking about price in a challenging market in the safety world. And then I would say we weren't terribly disciplined in parts of our other product categories either. Now, when I think about how we address that, the first step is just to elevate the issue. And I think Dan and I and Jeff and everybody involved in sales leadership have been, are raising the awareness that, as you're pursuing business in a soft market, we need to be fairly mindful of, you know, the solutions that we're bringing to the table. And what we should be compensated for bringing those solutions to bear.

Speaker Change: and in light of that, we just, I just don't think we were as disciplined about, you know, how we're thinking about price in a challenging market in a safety world. And then I would say we weren't terribly disciplined in parts of our other products categories either. Now, when I think about how we address that.

Speaker Change: The first step is just to elevate the issue. And I think Dan and I and Jeff and everybody involved in sales leadership have been raising the awareness of, as you're pursuing business in a soft market, we need to be fairly mindful of, you know, the solutions that we're bringing to the table.

Holden Lewis: And I think we've done a lot of talking about that and raising that awareness. But the second thing is to have tools that can provide insights into the field, real tangible, you know, financial financial tools. And over the last, three, four, five years, we spent a lot of time building and refining those tools, learning how to operate those tools, and navigate them. And, you know, that's intended to provide greater insight into what the market cost for something is, what pricing is, what costing is, etc.

Holden Lewis: And what we should be compensated for bringing those solutions to bear. And I think we've done a lot of talking about that and raising that awareness. But the second thing is to have tools that can provide insights into the field, real tangible financial tools. And over the last three, four, or five years, you spent a lot of time. Building and refining those tools, learning how to operate those tools and navigate them. And, you know, that that's intended to provide greater insight into what the market cost for something is, what pricing is, what costing is, et cetera.

Speaker Change: And what we should be compensated for bringing those solutions to bear.

Speaker Change: and I think we've done a lot talking about that and raising that awareness. But the second thing is, is to have tools that can provide insights into the field, real tangible, you know, financial, financial tools. And over the last

Holden Lewis: And, you know, we use those tools to try to incentivize behavior among our blue team, you know, colleagues, and, you know, we're going to use those tools in the third quarter of 2024 to do exactly that.

Speaker Change: 3, 4, 5 years, we spent a lot of time.

Speaker Change: building and refining those tools, learning how to operate those tools and navigate them.

Speaker Change: You know the that's intended to provide greater insight into

Speaker Change: What the market cost for something is, what pricing is, what costing is, et cetera. And, you know, we use those tools to try to incentivize behavior among our Blue Team, you know, colleagues.

Holden Lewis: And, you know, we use those tools to try to incentivize behavior among our blue team, you know, colleagues. And, you know, we're going to use those tools in the third quarter of 2024. To do exactly that. And so, at the end of the day, I think that we need more discipline among our contract sellers and more discipline in our field personnel. And they need to trust the tools because the tools are in great shape. And we're just going to, we're just going to use the levers that we have at our disposal to take an organization that's more aware of the challenge that this marketplace has given us.

Holden Lewis: And so, at the end of the day, I think that we need more discipline among our contract sellers and more discipline in our field personnel, and they need to trust the tools because the tools are in great shape. And we're just going to use the levers that we have at our disposal to take an organization that's more aware of the challenge that this marketplace has given us and, and, you know, respond accordingly. Thank you, Holden.

Speaker Change: You know, we're going to use those tools in the third quarter of 2024.

Speaker Change: to do exactly that. And so at the end of the day, I think that we need more discipline among our contract sellers and more discipline in our field personnel and they need to trust the tools because the tools are in great shape.

Speaker Change: We're just going to use the levers that we have at our disposal to take an organization that's more aware of the challenge that this marketplace has given us and respond accordingly.

Holden Lewis: And, you know, respond accordingly.

Holden Lewis: Thank you, Holden. As a follow-up, I wanted to ask about the nexus between some of the warehousing customers where you've been ramping and the gross margin trends. It sounds like the impact from the warehousing ramps was as planned in Q2 and should ease into Q3. But any other context or any, anyway, you can quantify that would be helpful. And then if you've set that against your typical gross margin trends, Q2 to Q3, and maybe even into Q4. How does that net out in terms of what you might forecast for this year versus the typical, just given some of these new dynamics.

Thomas Allen Moll: As a follow-up, I wanted to ask about the nexus between some of the warehousing customers where you've been ramping up and the gross margin trends. It sounds like the impact from the warehousing ramps was as planned in Q2 and should ease into Q3. But any other context or any way you can quantify that would be helpful.

Speaker Change: Thank you Holden. As a follow-up I wanted to ask about the nexus between some of the warehousing customers where you've been ramping and the gross margin trends.

Speaker Change: It sounds like the impact from the warehousing ramps was as planned in Q2 and should ease into Q3.

Speaker Change: But any other context or any way you can quantify that would be helpful. And then if you set that against your typical gross margin trends, Q2 to Q3, and maybe even into Q4,

Holden Lewis: And then if you've set that against your typical gross margin trends, Q2 to Q3 and maybe even into Q4, how does that net out in terms of what you might forecast for this year versus the usual just given some of these new dynamics? Now recall that, you know, I had indicated that some of the gross margin trends that were impacting Q2 were going to be largely contained in Q2, and some of those may have bled into July a bit.

Speaker Change: How does that net out in terms of what you might forecast for this year versus the typical just given some of these new dynamics?

Holden Lewis: Now recall that, you know, I indicated that some of the gross margin trends that were impacting Q2 were going to be largely contained to Q2, and some of those may have bled into July a bit. But for the most part, I think that statement remains true. If we remove that dynamic, then I think the, you know, the gross margin on that product is unremarkable for safety products, frankly, going forward. Now, do I think the investments that we've been making and the actions we've been taking puts us on pace to get additional revenue from that customer set in the back half of the year.

Speaker Change: Now recall that, you know, I had indicated that some of the gross margin trends that were impacting Q2 were going to be largely contained to Q2, and some of those may have bled into July a bit, but for the most part, I think that statement remains true. If we remove that dynamic,

Holden Lewis: But for the most part, I think that statement remains true. If we remove that dynamic, then I think the gross margin on that product is unremarkable for safety products, frankly, going forward. Now, do I think the investments that we've been making and the actions that we've been taking put this on pace to get additional revenue from that customer set in the back half of the year? I do.

Speaker Change: Then I think the, you know, the gross margin on that product is unremarkable for safety products, frankly.

Speaker Change: Now do I think the investments that we've been making and the actions we've been taking puts us on pace to

Speaker Change: Get additional revenue from that customer set in the back half of the year? I do.

Holden Lewis: I do. But it shouldn't have an appreciable mix impact on the safety margin as a category. Does that answer the question?

Speaker Change: But it shouldn't have an appreciable mixed impact on the safety margin as a category.

Holden Lewis: But it shouldn't have an appreciable mixed impact on the safety margin as a category. Does that answer the question? Uh, yeah, and maybe just to tie it all together. If you think about, and this is the consolidated results I'm talking about, your typical progression for gross margins from Q2 to Q3, how would you characterize that typical progression, and is there anything this year where there's a noteworthy good guy or a bad guy? It almost feels like a third question.

Holden Lewis: Yeah, and maybe just to tie it all together, if you think about, and this is consolidated results I'm talking to here, your typical progression for gross margins from Q2 to Q3. How would you characterize that typical progression and is there anything this year where there's a noteworthy good guy or a bad guy. Almost feels like a third question. I would tell you that the traditional gross margin pattern from Q2 to Q3 for the company. It's typically Q2, and Q3 looks fairly typical or looks fairly similar to one another. Now relating it back to the question that you originally asked on the warehousing side of the business, you know I think a lot of that impact that we talked about last quarter, very little of it is going to remain in the gross margin.

Speaker Change: Does that answer the question?

Speaker Change: Yeah, and maybe just to

Speaker Change: Tied all together if you think about and this is consolidated results I'm talking to here your your typical progression for gross margins from Q2 to Q3

Speaker Change: How would you characterize that typical progression and is there anything this year where there's a noteworthy good guy or a bad guy?

Thomas Allen Moll: I would tell you that the traditional gross margin pattern from Q2 to Q3 for the company is typically Q2 and Q3 look fairly typical or look fairly similar to one another. Now, relating it back to the question that you originally asked on the warehousing side of the business. You know, like I said, I think a lot of that impact that we talked about last quarter, very little of it is going to remain in the gross margin. And so I think that think about seasonality and maybe a touch better than that, based on the absence of some of those expenses. I got it.

Speaker Change: It almost feels like a third question. I would tell you, I would tell you that the traditional gross margin pattern from Q2 to Q3 for the company

Speaker Change: It's typically Q2 and Q3 looks fairly typical, or looks fairly similar to one another. Now relating it back to the question that you originally asked on the warehousing side of the business.

Speaker Change: I think a lot of that impact that we talked about last quarter, very little of it is going to remain in the gross margin. And so I think about seasonality and maybe a touch better than that based on the absence of some of those expenses.

Holden Lewis: And so I think that think about seasonality and maybe a touch better than that based on the absence of some of those expenses. Got it.

Tommy Mall: Thank you, Holden. I'll turn it back.

Speaker Change: Got it. Thank you, Holden. I'll turn it back.

Stephen Volkmann: Thank you. Our next question is come from the line of Stephen Volkmann with Jeffries. Please proceed with your questions. Hi, good morning, guys. Maybe since we're on the PNL, I'll just stick with it and go to the next level here. Holden, I think you said maybe both said several times there's a real focus on SG&A control and I know that some of the unusual SG&A expenses from the second quarter probably go, you know, trail off. So I'm curious how you're thinking about sort of leverage on SGNA holding in the second half. You know, as I was looking through it, I'm going to dog the question a little bit because what I've observed is you're going to tell me what you're going to build in for our revenue growth.

Holden Lewis: Thank you, Holden. I'll turn it back. Thank you. Our next question has come from the line of Stephen Volkmann with Jeffries. Please proceed with your question. Hi, good morning, guys.

Speaker Change: Thank you. Our next questions come from the line of Stephen Volkmann with Jeffries. Please proceed with your questions.

Stephen Edward Volkmann: Maybe since we're on the P&L, I'll just, I'll stick with it and go to the next level here. Holden, I think you both said several times, there's, you know, a real focus on SG&A control. And I know that some of the unusual SG&A expenses from the second quarter probably go, you know, trail off. So I'm curious how you're thinking about sort of leverage on SG&A Holden in the second half.

Stephen Edward Volkmann: Hi, good morning, guys. Maybe since we're on the P&L, I'll just, I'll stick with it and go to the next level here. Holden, I think you said, maybe both said several times, there's

Stephen Edward Volkmann: You know, a real focus on SG&A control, and I know that some of the unusual SG&A expenses from the second quarter probably go, you know, trail off. So I'm curious how you're thinking about sort of leverage on SG&A, Holden, in the second half.

Stephen Edward Volkmann: You know, as I was looking through it, I'm going to dodge the question a little bit because what I've observed is that you're going to tell me what you're going to build in for our revenue growth. If I look at Q2 and Q3 SG&A historically, as an example, what I find is that when Q3 revenue growth accelerates versus Q2, our SG&A dollar, the dollar growth of our SG&A accelerates as well, and vice versa, right? And so it's hard for me to answer that question without knowing what you're going to build in or what each you're going to build in for your revenue growth. And we don't have time for that.

Speaker Change: You know, as I was looking through it, I'm going to dodge the question a little bit because what I've observed is, you're going to have to tell me what you're going to build in for our revenue growth.

Stephen Volkmann: If I look at Q2 and Q3 SGNA historically as an example, what I find is that when Q3 revenue growth accelerates versus Q2, our SGNA dollar, the dollar growth of our SGNA accelerates as well and vice versa, right? And so it's hard for me to answer that question without knowing what you're going to build in or what each of you're going to build in for your revenue growth, and we don't have time for that this work. You know, and so you know, I would encourage you to figure out what you do with the revenue line, and traditionally, you'll see SGNA growth between Q2 and Q3 kind of track that trend.

Speaker Change: If I look at Q2 and Q3 SG&A historically, as an example, what I find is that when Q3 revenue growth accelerates versus Q2, our SG&A dollar, the dollar growth of our SG&A accelerates as well.

Speaker Change: Vice versa, right? And so it's hard for me to answer that question without knowing what you're going to build in or what each you're going to build in for your revenue growth, and we don't have time for that in this forum.

Holden Lewis: You know, and so, you know, I would encourage you to figure out what you do with the revenue line, and traditionally, you'll see SG&A growth between Q2 and Q3, kind of track that trend. Now, I do anticipate that we'll be tighter in Q3 than we were in Q2 with costs. That might mitigate that impact to some degree. But the reality is, I know everyone kind of wants to say, well, let's just look at the dollars in a vacuum and what has historically happened. But when 70 to 75% of your SG&A is labor, and there's a significant component of your labor that is a variable cost. I can't separate the analysis from the analysis of revenue.

Speaker Change: You know, and so, you know, I would encourage you to figure out what you do with the revenue line. And traditionally, you'll see SG&A growth between Q2 and Q3 kind of track.

Stephen Volkmann: Now, I do anticipate that will be tighter in Q3 than we were with Q2 with costs. That might mitigate that impact of some degree, but the reality is I know everyone kind of want to say, well, let's just look at the dollars in a vacuum and what has historically happened. But when 70 to 75% of your SG&A is labor and there's a significant component of your labor that is variable cost, I can't separate the analysis from the analysis of revenue. And so build in your revenue forecast, take a look at what historically Q2, Q3 has played out, make your assumptions, and on top of that, I would argue that, you know, we expect to be a little bit tighter on cost and perhaps seasonally we have been in the past.

Speaker Change: That trend. Now, I do anticipate that we'll be tighter in Q3 than we were in Q2 with costs.

Speaker Change: That might mitigate that impact to some degree, but the reality is, I know everyone kind of wants to say, well, let's just look at the dollars in a vacuum and what is historically happened, but when 70 to 75% of your SG&A

Speaker Change: is labor and there's a significant component of your labor that is variable cost. I can't separate the analysis from the analysis of revenue.

Holden Lewis: And so build in your revenue forecast, take a look at what Q2, Q3 has historically played out, make your assumptions. And on top of that, I would argue that, you know, we expect to be a little bit tighter on costs than perhaps seasonally we have been in the past. And that's how I think about our SDNA trajectory in the next quarter or two. Okay, fair enough.

Speaker Change: And so build in your revenue forecast, take a look at what historically.

Speaker Change: Q2, Q3 has played out. Make your assumptions. And on top of that, I would argue that, you know, we expect to be a little bit tighter on costs than perhaps seasonally we have been in the past. And that's how I think about our STNA trajectory in the next, you know, quarter or two.

Stephen Volkmann: And that's how I think about our SGNA trajectory in the next quarter or two.

Stephen Volkmann: Okay, fair enough.

Holden Lewis: And since you sort of teased me up on this, in terms of thinking about the revenue trend going forward, should we read anything into kind of the better cadence of the quarter, i.e., May better than April, June better than May? Do you think there's any kind of an inflection happening, or is it more just that your ability to outgrow is kind of starting to gain some traction?

Stephen Volkmann: And since you sort of teed me up on this, in terms of thinking about the revenue trend going forward, should we read anything into kind of the better cadence of the quarter? IE, you know, may better than April, June better than May. Do you think there's any kind of an inflection happening, or is it more just that your ability to outgrow is kind of starting to gain some traction, or is it just kind of the numbers are still small and we shouldn't read too much into it. Okay. I believe our ability to gain traction has improved.

Speaker Change: Okay, fair enough. And since you sort of teed me up on this,

Speaker Change: In terms of thinking about the revenue trend going forward.

Speaker Change: Should we read anything into kind of the better cadence of the quarter, i.e., you know, May better than April , June better than May? Do you think there's any kind of an inflection happening or is it more just that your ability to outgrow is kind of starting to gain some traction?

Holden Lewis: Or is it just kind of the numbers are still small, and we shouldn't read too much into it? I built, I believe our ability to gain traction has improved. I think some of the underlying statistics I cited are evidence of that. I also said in April that we popped up about 50 in ISM in March, and that felt kind of good. And three weeks later, two weeks later, I was kind of like, well, that good ended really fast. But, you know, it's a noisy fall. Last I heard, there is a US presidential election.

Speaker Change: Or is it just kind of the numbers are still small and we shouldn't read too much into it?

Speaker Change: Okay, um, I, I built, I believe our ability to, to gain traction has improved.

Holden Lewis: I think some of the underlying statistics I cited are evidence of that. I also sit in April that we popped about 50 and ISM in March, and that felt kind of good. And in three weeks, two weeks later, I was kind of like, well, that's good and really fast. But, you know, it's a noisy fall. Last I heard, there's a U.S. Presidential election. And you know, like most years, it's kind of a boring event. But, but I think there's going to be a lot of noise in the market. And some of the stuff the feds looking at doing is positive.

Speaker Change: I think some of the underlying statistics I cited are evidence of that. I also said in April that we popped about 50 in ISM in March, and that felt kind of good. And two weeks later, I was kind of like, well, that good ended really fast.

Speaker Change: But you know, it's a noisy fall. Last I heard, there's a U.S. presidential election, and you know, like most years, it's kind of a boring event.

Speaker Change: But I think there's going to be a lot of noise in the market, and some of the stuff the Fed's looking at doing is positive. I don't know that that changes things in the next three to six months, but the fact that they're talking about it is positive.

Holden Lewis: And, you know, like most years, it's kind of a boring event. But, but I think there's gonna be a lot of noise in the market. And some of the stuff the Fed's looking at doing is positive. I don't know that that changes things in the next three to six months, but the fact that they're talking about it is positive.

Holden Lewis: I don't know that that changes things in the next three to six months. But, but the fact that they're talking about is positive.

Holden Lewis: If you look, if the question is about green shoots, I don't have a lot of green shoots for you on the macro side. Where I do think we're accelerating though is on the self-help side, right? With the contract signings and the onsite signings and the FMI signings, the reality is you sign an onsite today. It's not generating revenue tomorrow. There's a period of time it takes for those sorts of things to start to hit our results. In the first half of 2024, we were feeling the impact of relatively low signings in 2023. I think in the back half of 24, you're going to begin to feel the benefits of the stronger signings in the first half of 2024, whether that be FMI, whether that be onsite, whether that be contracts.

Holden Lewis: If you're looking if the question is about green shoots, I don't have a lot of green shoots for you on the macro. Where I do think we're accelerating, though, is on the self-help side, right, with the contract signings and the on-site signings and the FMI signings. The reality is, you sign an onsite today, it's not generating revenue tomorrow; there's a period of time it takes for those sorts of things to start to hit our results.

Speaker Change: If you're looking, if the question is about green shoots, I don't have a lot of green shoots for you on the macro side.

Speaker Change: where I do think we're accelerating though is on the self-help side right with the contract signings and the on-site signs and the FMI signings the reality is

Holden Lewis: In the first half of 2024, we were feeling the impact of relatively low signings in 2023. I think in the back half of 24, you're going to begin to feel the benefits of the stronger signings in the first half of 2024, whether that be FMI, whether that be on-sites, whether that be contracts. And so I think we're very encouraged about what we're doing to acquire customers. But I don't have a lot of green shoots at the moment.

Speaker Change: You sign an onsite today, it's not generating revenue tomorrow.

Speaker Change: There's a period of time it takes for those sorts of things to start to hit our results. In the first half of 2024, we were feeling the impact of relatively low signings in 2023.

Speaker Change: I think in the back half of 24, you're going to begin to feel the benefits of the stronger signings in the first half of 2024, whether that be FMI, whether that be onsites, whether that be contracts. And so I think we're very encouraged about what we're doing to acquire customers.

Holden Lewis: And so I think we're very encouraged about what we're doing to acquire customers. But I don't have a lot of green shoots at the macro level. All right.

Speaker Change: But I don't have a lot of green shoots at the macro level.

Stephen Edward Volkmann: Thank you, guys. Thank you. Our next questions come from the line of Nigel Coe with Wolf Research. Please proceed with your question. Thanks. Good morning, everyone.

Stephen Volkmann: Thank you, guys. Thank you.

Speaker Change: All right, thank you guys.

Milan and Nigel Coe: Our next question is from Milan and Nigel Co. with Wolf Research. Please proceed with your questions. Oh, thanks. Good morning, everyone. Good morning. I just wanted to go back to the price deflation on the safety and other products. I mean, obviously, you addressed the question from Tommy, but this is a function of a more competitive environment. So you've seen a bit more pressure from competitors, maybe because they've got more products will exist in the trees. Or is this more elective from your RBPs to try and gain share? I mean, obviously you've been very successful in contract signings on sides, etc.

Speaker Change: Thank you. Our next questions come from the line of Nigel Coe with Wolfe Research. Please proceed with your questions.

Nigel Edward Coe: I just want to go back to price deflation on safety and other products. I mean, obviously, you addressed the question from Tommy, but is this a function of a more competitive environment? So you're seeing a bit more pressure from competitors, maybe because they've got more products or excess inventories, or is this more elective from your RVPs to try and gain share? I mean, obviously, you've been very successful in contract signings, on-sites, etc.

Nigel Edward Coe: Thanks. Good morning, everyone. I just want to go back to the price deflation on the safety and other products. I mean, obviously, you addressed the question from Tommy, but

Nigel Edward Coe: Is this a function of a more competitive environment, so you're seeing a bit more pressure from competitors, maybe because they've got more products or excess inventories, or is this more elective from your RBPs?

Nigel Edward Coe: to try and gain share. I mean, obviously, you've been very successful in contract signings, on sites, etc. So I'm just wondering if this is a bit more offensive or defensive.

Holden Lewis: So I'm just wondering if this is a bit more offensive or defensive. I don't know that I have a great way to parse that out. You know, we are in the marketplace trying to win business. I don't think that we need to compete on price. We historically haven't competed on price, but the reality is the marketplace is challenging. And that introduces different stresses than would be the case when it's not, right? And so I can't tell you it's 60, 40, one way or the other. I just I don't I'm not in those minds when they're having those conversations, but I don't have any reason to believe that the two things aren't related, to be honest.

Speaker Change: I don't know that I have a great way to parse that out.

Nigel Edward Coe: So I'm just wondering if this is a bit more offensive or not, I don't know that I have a great way to parse that out, you know, we are in the marketplace trying to win business. I don't think that we need to compete on price.

Speaker Change: You know, we are in the marketplace trying to win business. I don't think that we need to compete on price. We historically haven't competed on price, but the reality is the marketplace is challenging.

Holden Lewis: We historically haven't competed on price, but the reality is the marketplace is challenging, and that introduces different stresses than would be the case when it's not right.

Speaker Change: And that introduces different stresses than would be the case when it's not right. And so I can't tell you it's 60 40 one way or the other. I just I don't I'm not in those minds when they're having those conversations, but I don't have any reason to believe that the two things aren't related to be honest.

Holden Lewis: And so I can't tell you it's 6040. One way or the other. I just don't know. I'm not in those minds when they're having those conversations.

Holden Lewis: But I don't have any reason to believe that the two things aren't related, to be honest. We are hungry to grow, and that influences decisions. Our customers are hungry to save, to save costs, and that isn't necessarily a negative sometimes, oftentimes, we're the source of saving costs, and that helps us some of our traction with national consigning, some of our traction with FMI might be a customer that's a little bit slower right now, and they're looking for ways to save costs.

Holden Lewis: We are hungry to grow, and that influences decisions. Our customers are hungry to save to save cost; that influences decisions. And that is necessarily a negative; times oftentimes we're the source of saving cost. And that that helps us some of our traction with national consigning. Some of our traction was FMI; might be a customer that's that's a little bit slower right now, and they're looking for ways to save costs. And we're the we're the ticket, and we're seeing that in our success to the degree that part of the question is. Is Fastenal consciously willing to accept lower margins in order to win business?

Speaker Change: We are hungry to grow and that influences decisions. Our customers are hungry to save.

Speaker Change: Save Costs, that influences decisions. And that isn't necessarily a negative. Oftentimes, we're the source of saving cost.

Speaker Change: And that helps us. Some of our traction with National Account Signing, some of our traction with FMI might be a customer that's a little bit slower right now, and they're looking for ways to save costs, and we're the ticket.

Holden Lewis: And where the ticket is, And we're seeing that in our success. Now, to the degree that part of the question is, is Fastenal consciously willing to accept lower margins in order to win business? I would tell you the answer is no.

Speaker Change: And we're seeing that in our success. Now, to the degree that part of the question is,

Speaker Change: is Fastenal consciously willing to accept lower margins in order to win business? I would tell you the answer is no.

Holden Lewis: I would tell you the answer is no. There's individual decisions being made in the field based on conversations that are being had and judgements that make sense to that individual in that situation at that time. So there's not a, you know, we aren't winning business because we said, don't sweat the margin. We think the margin of the return on our business is very important. But, you know, there is nonetheless a challenging marketplace, and different individuals react differently to that marketplace. And I just think that you're getting to use someone else's word of nexus between both the market and, you know, the conversations, the customers.

Holden Lewis: There are individual decisions being made in the field based on conversations that are being had and, you know, judgments that make sense to that individual and that situation at that time. So there's not a, you know, we aren't winning business because we said don't sweat the small stuff. We think the margin of return on our business is very important. But, you know, there is nonetheless a challenging marketplace, and different individuals react differently to that marketplace.

Speaker Change: There's individual decisions being made in the field based on conversations that are being had and, you know, judgments that make sense to that individual and that situation at that time.

Speaker Change: So there's not a, you know, we aren't winning business because we said don't sweat the margin. We think the margin of return on our business is very important. But, you know, there is nonetheless a challenging marketplace and different individuals react differently to that marketplace. And I just think that you're getting

Holden Lewis: And I just think that you're getting, someone else's word, a nexus between both the market and, you know, the conversations, the, Yeah, no, that's a great answer. Thanks for that. And my follow-up question is on the onsite performance, and the mature onsite looks like mature onsite. [inaudible] That's production.

Speaker Change: So use someone else's word, a nexus between both the market and, you know, the conversations with customers.

Milan and Nigel Coe: Yeah, no, that's a great answer. Thanks for that.

Holden Lewis: And my follow up is on the on site performance and the mature on site looks like mature on sites, cells of many down low single digits in that sort of realm. Obviously, we saw this trend develop last quarter, and you made some random changes around that. Just wondering, you know, maybe just a bit more detail on what you've seen in these mature on sites and sort of the pathway to improve performance. That's production. You know, Dan said it, I think in this preamble, right? When, when you have one customer, the, the fate of your business hinges on what the experience of that one customer is and as a business where 75% manufacturing within our on site world, I bet you would substantially above that level.

Speaker Change: Yeah, no, that's a great answer. Thanks for that. And my follow up is on the onsite performance and the mature onsite, looks like mature onsites.

Speaker Change: Cells, maybe down low single digits in that realm. Obviously, we saw this trend develop last quarter, and you've made some magical changes around that. Just wondering, maybe just a bit more detail on what you've seen in these mature onsites and sort of the pathway to improve performance?

Speaker Change: That's production. You know, it.

Holden Lewis: You know, Dan said it, I think, in his preamble, right, when you have one customer, the fate of your business hinges on what the experience of that one customer is. And as a business, we're 75% manufacturing. Within our on-site world, I bet it's substantially above that level. And so if there's a manufacturing environment that's challenging, the onsites are going to feel it to a greater degree.

Speaker Change: Dan said it, I think, in his preamble, right? When you have one customer, the fate of your business hinges on what the experience of that one customer is. And as a business, we're 75% manufacturing. Within our onsite world, I bet you it's substantially above that level.

Holden Lewis: And so if there's a manufacturing environment that's challenging, the on-sites are going to feel it to a greater degree. The on sites are going to be more heavily oriented towards production. That's why you're seeing our OEM fasteners grow in the mix, along with on sites growing in our sales mix. And so, you know, I think you have a combination of the impact of macro on that particular customer category. Combined with the fact that, again, it does take a little while for the signing success that we're having today to translate into revenues tomorrow. So I think you're bearing a disproportionate burden of the macro in the first half of this year.

Speaker Change: And so if there's a manufacturing environment that's challenging.

Holden Lewis: The onsites are going to be more heavily oriented towards production. That's why you're seeing our OEM fasteners grow in the mix, along with onsites growing in our sales mix. And so, you know, I think you have a combination of the impact of macro on that particular customer category combined with the fact that, again, it does take a little while for the signing success that we're having today to translate into revenues tomorrow.

Speaker Change: The onsites are going to feel it to a greater degree. The onsites are going to be more heavily oriented towards production. That's why you're seeing our OEM fasteners grow in the mix along with onsites growing in our sales mix. And so

Speaker Change: You know, I think you have a combination of the impact of macro on that particular customer category combined with the fact that again, it does take a little while for the signing success that we're having today to translate into revenues tomorrow.

Holden Lewis: So I think you're bearing a disproportionate burden of the macro in the first half of this year, and it doesn't appear that the second half of the macro is gonna be a lot better. But I do think that some of the signings that we've enjoyed in the first half are going to begin to grow in that environment. And that's how I probably would characterize it. Okay, on the mature on the mature side, I'll just throw in one little nugget.

Speaker Change: So I think you're bearing disproportionate burden of the of the macro in the first half of this year.

Dan Florness: Doesn't appear the second half of the macro is going to be a lot better, but I do think that some of the signings that we've enjoyed in the first half are going to begin to grow in that environment. And that's how I probably characterize it. I'm the mature on the mature on site. I'll just throw on one little nugget.

Speaker Change: It doesn't appear the second half of the macro is going to be a lot better, but I do think that some of the signings that we've enjoyed in the first half are going to begin to grow in that environment. And that's how I'd probably characterize it.

Speaker Change: Unknown Speaker On the mature on side I'll just throw in one little nugget and that is

Daniel L. Florness: And that is because our East and Western United States business units have been separate business units since 2007. And a year ago, we pulled them back together into one, and Casey Miller oversees that $6 billion business in the US. Casey was a regional vice president in the Kentucky-Tennessee area, originally from Kentucky, lives in Nashville now, and, are Casey's business and, by extension, Eastern US, which he led for the last eight years, is great at customer acquisition. One observation he made as he'd gotten to know the Western Business Unit was that the Western Business Unit wasn't as great at customer acquisition. But they were great at maturing and nurturing those relationships.

Dan Florness: And that is our East and Western United States business units have been separate business units since 2007. And a year ago, we pulled them the other back in the one, and Casey Miller will receive that $6 billion business in the US. Casey was a regional vice president in the Kentucky Tennessee area, originally from Kentucky, listen Nashville now. And he, our Casey's business, and by extension Eastern US, which he led for the last eight years, is great at customer acquisition. Great at it. One observation he made as he's gotten to the Western business unit because the Western business unit wasn't as great at customer acquisition.

Speaker Change: Our East and Western United States business units have been separate business units since 2007.

Speaker Change: A year ago, we pulled them together back into one, and Casey Miller oversees that $6 billion business in the U.S. Casey was a regional vice president in the Kentucky-Tennessee area. He's originally from Kentucky, lives in Nashville now. And...

Speaker Change: Casey's business, and by extension, Eastern US, which he led for the last eight years.

Speaker Change: is great at customer acquisition, great at it.

Speaker Change: One observation he made as he's gotten into the Western Business Unit, because the Western Business Unit wasn't as great at customer acquisition.

Dan Florness: But they were great at maturing and farming those relationships. And so the one benefit of combining the US and the one business unit, I think that East and western halves of our business can really learn a lot from each other. And I think that's a positive and a win for our customers, our employees, and our shareholders.

Speaker Change: But they were great.

Speaker Change: at maturing and farming those relationships. And so the one benefit of combining the US into one business unit, I think that East and Western halves of our business can really learn a lot from each other. And I think that's a positive and a win for our customers, our employees, and our shareholders.

Daniel L. Florness: And so the one benefit of combining the US into one business unit, I think that the East and Western halves of our business can really learn a lot from each other. And I think that's a positive and a win for our customers, our employees, and our shareholders. Great. Thanks, Ben. Thank you. Our next question comes from the line of David Manthey with Baird.

Speaker Change: Great. Thanks, Ben.

David Manthey: Our next question is come from the law and David Manthey, with Baird. Please proceed with your questions. Thanks. Good morning, guys. Good morning.

Ben: Thank you.

Speaker Change: Thank you. Our next questions come from the line of David Manthey with Baird. Please proceed with your questions.

David John Manthey: Please proceed with your question. Thanks. Good morning, guys. Good evening.

David John Manthey: Thanks. Good morning, guys. Good morning.

Daniel L. Florness: Yeah, and congratulations to Jeff on the new title. Just one question this morning; I'd like to zoom out and maybe ask you about some secular factors here. Could you refresh us on how you think about outgrowth versus industrial production and your contribution margin expectations? And here I'm thinking not about the next year but the long term over the cycle.

David Manthey: Congratulations to Jeff on the new title. Just one question this morning. I'd like to zoom out and maybe ask you about some secular factors here. Could you refresh us on how you think about outgrowth versus industrial production and your contribution margin expectations? And here I'm thinking not about the next year, but long term over the cycle. Thanks. You know, I would say historically, I'll say recent history, last decade or so. We have typically found that our outgrowth against industrial production has been in the five to six percentage point range. One of the reasons that we have made or that we made the changes that we made 12, 15, 18 months ago was because, frankly, we had slipped in that regard.

David John Manthey: Yeah, and congratulations to Jeff on the new title. Just one question this morning, I'd like to zoom out and maybe ask you about some secular factors here. Could you refresh us?

David John Manthey: And how you think about outgrowth versus industrial production and your contribution margin expectations. And here I'm thinking not about the next year, but long term over the cycle. Thanks.

Holden Lewis: Thanks. You know, historically, I'll say recent history, the last decade or so, we have typically found that our outgrowth against industrial production has been in the five to six percentage points. One of the reasons that we have, Mayor, made the changes that we made 12, 15, 18 months ago was because, frankly, we had slipped in that regard. And it's probably been running in a three to 4% range, which is below what we are typically accustomed to.

David John Manthey: You know, I would say historically, and I'll say recent history, last decade or so,

David John Manthey: typically found that our outgrowth against industrial production has been in the five to six percentage point range.

David John Manthey: One of the reasons that we have made or that we made the changes that we made 12, 15, 18 months ago was because frankly, we had slipped in that regard. And it's probably been running in three to 4% range, which is below what we are typically accustomed to.

Holden Lewis: And it's probably been running in the three to four percent range, which is below what we are typically accustomed to. The changes that we've made were very confident will move us back to that five to six percent range. But quite frankly, I think our objective over time. And look, we have to prove to everybody that we can do this. But I think our objective over time is to increase that five to six to something greater than that, because we think that the value we bring to the market warrants our ability to grow faster. And so what you're seeing in terms of the changes in personnel, the changes in approaches, it's really just the first step to kind of correcting something that maybe we weren't doing as well a year and a half ago.

Holden Lewis: The changes that we've made, we're very confident will move us back to that 5% to 6% range. But quite frankly, I think our objective over time, and look, we have to prove to everybody that we can do this, but I think our objective over time is to increase that 5% to 6% to something greater than that, because we think that the value we bring to the market warrants the ability to grow faster.

David John Manthey: The changes that we've made, we're very confident will move us back to that five to six percent range, but quite frankly, I think our objective over time, and look we have to we have to prove to everybody that we can do this, but I think our objective over time is to increase that five to six to something greater than that.

Holden Lewis: And so what you're seeing in terms of the changes in personnel, the changes in approaches, it's really just the first step to kind of correcting something that maybe we weren't doing as well a year and a half ago.

David John Manthey: Because we think that the value we bring to the market warrants

David John Manthey: The ability to grow faster and so.

David John Manthey: What you're seeing in terms of the changes in personnel, the changes in approaches, it's really just the first step to kind of correcting something that maybe we weren't doing as well a year and a half ago.

Holden Lewis: And then we're going to build on that. And I think from a secular standpoint, we'd like to do better than that five to six percent, you know, in excess of IP in future. From a incremental margin standpoint, a contribution margin standpoint, you know, I think you've always said, you know, 21, 22 percent type operating margin is the business that that's where we think we can operate effectively while still growing significantly in gaining market share. And in this environment of 2 percent growth, we've given up some of that margin. But I do believe that as the business gets better, when the business gets better, I think we still have the capacity to leverage the P and L and return to that 21, 22 percent range.

David John Manthey: And then we're going to build on that. And I think from a secular standpoint, we'd like to do better than that five to six percent, you know, in excess of IP in future from a in a

Holden Lewis: And then we're going to build on that. And I think from a secular standpoint, we'd like to do better than that five to 6%, you know, in excess of IP in the future. From an incremental margin standpoint, a contribution margin standpoint, you know, I think we've always said, you know, 21, 22% operating margin is the business. That's where we think we can operate effectively while still growing significantly and gaining market share.

David John Manthey: Incremental Margin standpoint, Contribution Margin standpoint, you know I think we've always said you know 21-22 percent type operating margin is the business that that's where we think we can operate effectively while still growing significantly in gaining market share.

Holden Lewis: And in this environment of 2% growth, we've given up some of that margin. But I do believe that as the business gets better, when the business gets better, I think we still have the capacity to leverage the P&L and return to that 21-22% range. Appreciate it, Holden. Thank you.

David John Manthey: And in this environment of 2% growth, we've given up some of that margin, but I do believe that as the business gets better, when the business gets better, I think we still have the capacity to leverage the P&L and return to that 21, 22% range.

Holden Lewis: Appreciate it, Olden.

Holden Lewis: Thanks for the update. Thank you.

Speaker Change: Appreciate it, Holden. Thanks for the update.

Ryan Merkel: Our next question has come from the line of Ryan Merkel with William Blair.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next questions come from the line of Ryan Merkel with William Blair. Please proceed with your questions.

Ryan James Merkel: Please proceed with your question. Hey guys, thanks. Thanks for taking the questions. I just have one as well, and it's on the macro.

Ryan Merkel: Please proceed with your questions. Hey guys, thanks. Thanks for taking the question. I just have one. Well, and it's on the macro. So can you just level set us on the macro? Is it fair that the industrial economy is just slowed sort of slightly versus one queue or isn't more pronounced that that's the first part of the question. And then I'm hearing that it could stay a little week until after the election. I know that's crystal ball stuff, but what do you think? What do you think about that? You know, I will say that in terms of regional feedback, I probably got a few more comments about extended shutdowns, layoffs, things like that.

Ryan James Merkel: Hey guys, thanks for taking the question. I just have one as well and it's on the macro.

Holden Lewis: So can you just level set us on the macro? Is it fair that the industrial economy has just slowed sort of slightly versus one Q, or is it more pronounced? That's the first part of the question. And then I'm hearing that it could stay a little weak until after the election. I know that's crystal ball stuff. But what do you think?

Ryan James Merkel: So, can you just level-set us on the macro? Is it fair that the industrial economy has just slowed sort of slightly versus 1Q, or is it more pronounced? That's the first part of the question.

Speaker Change: I'm hearing that it could stay a little weak until after the election. I know that's crystal ball stuff, but what do you think about that?

Holden Lewis: What do you think about that? You know, I will say that in terms of regional feedback, I probably got a few more comments about extended shutdowns, layoffs, things like that. But it doesn't feel to me that the overall level of activity has changed.

Speaker Change: You know, I will say that in terms of regional feedback,

Speaker Change: I probably got a few more comments about extended shutdowns, layoffs, things like that. It doesn't feel to me that the overall level of activity has changed. It does feel to me like our customers have decided to

Holden Lewis: It doesn't feel to me that the overall level of activity has changed. It does feel to me like our customers have decided to, to some extent, throw in the towel on the near term and make some adjustments to their cost structures. In light of what has been a fairly lengthy downturn. So, like I said, I don't feel like the floor is falling any further, but I feel like customers are saying this could last longer than we expect and making cost adjustments to react. to it.

Holden Lewis: It does feel to me like our customers have decided to, to some extent, throw in the towel in the near term and make some adjustments to their cost structures in light of what has been a fairly lengthy downturn. So, like I said, I don't feel like the floor has fallen any further, but I feel like customers are saying this could last longer than we expect and making cost adjustments to react. That's how I'd probably characterize it. Um, in terms of the crystal ball, I don't know. I did it. I don't have a good answer for you, I'm afraid.

Speaker Change: To some extent, throw in the towel on the near term and make some adjustments to their cost structures in light of what has been a fairly lengthy downturn.

Speaker Change: Like I said, I don't feel like the floor has fallen any further, but I feel like customers are saying this could last longer than we expect and making cost adjustments to react to it.

Holden Lewis: That's how I probably characterize it. In terms of the crystal ball, I don't know. I don't have a good answer for you. I'm afraid. As you know, we don't have a lot of forward visibility. You know that. And I'm going to choose not to express an opinion about the election. The answer I can feel free to. I'm not touching that one of the ten-foot pole. Yeah, I get that. I was just sort of hearing that. From some of the feedback, and was just curious about RVPs. We're hearing that. I can tell you are closing from the election.

Speaker Change: In terms of the crystal ball, I don't know. I don't have a good answer for you, I'm afraid.

Holden Lewis: As you know, we don't have a lot of forward visibility, you know that, and I'm going to choose not to express an opinion about the election answer like if you're, I'm not touching that one with a 10-foot pole. Yeah, I get that. I was just sort of hearing that from some of the feedback and was just curious how RVPs were hearing that. Unknown Speaker Yeah, I can tell you that people say it does.

Speaker Change: As you know, we don't have a lot of forward visibility. You know that. And I'm going to choose not to express an opinion about the election. Dan certainly can feel free to. I'm not touching that one with a 10-foot pole.

Speaker Change: Yeah, I get that. I was just sort of hearing that from some of the feedback and was just curious if our VPs were hearing that. It usually happens where it slows in front of the election, I think, is history.

Holden Lewis: I think it's history. Well, I can tell you that people say it does. And yeah, I can tell you, Ryan, that we are getting a lot of feedback from the regionals that people are holding their powder. Until something is resolved on the election.

Holden Lewis: And yeah, I can tell you Ryan that we are getting a lot of feedback from the regionals that people are holding their powder until something gets resolved in the election. I'll leave it to the listeners to determine how much they think that is true or not true. Valid, not valid. Impactful, not impactful. I meant the election part. I won't touch the 10-foot pole. It's, you know, I suspect there aren't too many customers out there or players in the market that are expecting anything to rev up for.

Speaker Change: Well, I can tell you that people say it does. And yeah, I can tell you, Ryan, that we are getting a lot of feedback from the regionals that people are holding their powder until something gets resolved on the election. I'll leave it to the listeners to determine how much they think that is.

Holden Lewis: I'll leave it to the listeners to determine how much they think that is true, not true, valid, not valid, impactful, not impactful. I meant the election part. I won't touch the ten-foot pole. I suspect there aren't too many customers out there, players in the market, that are expecting anything to rev up for. And so I think it'll be fair with some dude. You got a reputation for predicting things. So I thought maybe you could go down that path. But no.

Speaker Change: True, not true, valid, not valid, impactful, not impactful. I meant the election part, I won't touch the 10-foot pole. You know, I suspect there aren't too many customers out there or players in the market that are expecting anything to...

Ryan James Merkel: And so I think it'll be fair with some dudes, figure you got a reputation for predicting things. So I thought maybe Yeah, go down that path. But no, I can't even predict that somebody's gonna win the election.

Speaker Change: rev up for. And so I think it'll be fairly subdued.

Ryan James Merkel: You've got a reputation for predicting things, so I thought maybe you could go down that path, but no. I can't even predict that somebody's going to win the election. Well, thanks, guys. I appreciate the color. You bet, Ryan. Thanks, Ryan. Thank you.

Ryan Merkel: I can't even predict if somebody's going to win the election. Well, thanks, guys. I appreciate the color. You bet, Ryan. Thank you.

Holden Lewis: Well, thanks, guys. I appreciate the color. You bet. Right. Right. Thank you. It is four minutes on the hour.

Dan Florness: It is four minutes on the hour. Again, thank you for joining us in the call today.

Daniel L. Florness: Again, thank you for joining us on the call today. I want to extend congratulations on the new role and new opportunity. And thanks, everybody. Have a good day. Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Speaker Change: It is four minutes on the hour again. Thank you for joining us in the call today. I want to extend to Jeff, his wife Tucson, and their their two children congratulations on the new role, a new opportunity.

Dan Florness: I want to extend to Jeff, his wife, Tucson, and their two children. Congratulations on the new role and the new opportunity. And thanks, everybody.

Operator: Have a good day.

Speaker Change: And thanks, everybody. Have a good day.

Operator: Thank you.

Operator: This just includes today's teleconference. We appreciate your participation.

Speaker Change: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

May disconnect your lines at this time. Enjoy the rest of your day. Thank you.