Q2 2026 Fastenal Co Earnings Call

July 14, 2026

Speaker #1: And welcome to the FastenAll Q2 2026 earnings results conference call. At this time, all participants are in your listen-only mode. A question and answer session will follow the formal presentation.

Operator: Welcome to the Fastenal Q2 2026 Earnings Results Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad, and we ask you please ask one question and one follow-up, then return to the queue. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star zero. It's now my pleasure to turn the call over to Dray Schreiber. Please go ahead, Dray.

Speaker #1: You may be placed into question queued anytime by pressing star 1 on your telephone keypad, and we ask that you please ask one question in one follow-up, then return to the queue.

Speaker #1: As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star 0. It's not my pleasure to turn the call over to Dre Schreiber.

Operator: As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star zero. It's now my pleasure to turn the call over to Dray Schreiber. Please go ahead, Dray.

Speaker #1: Please go ahead, Dre.

Speaker #2: Welcome to the FastenAll Company 2026 Q2 earnings conference call. This call will be hosted by Dan Florinis, our Chief Executive Officer, Jeff Watts, our President and Chief Sales Officer, and Max Tonicliff, our Chief Financial Officer.

Dray Schreiber: Welcome to the Fastenal Company 2026 Q2 earnings conference call. This call will be hosted by Dan Florness, our Chief Executive Officer, Jeff Watts, our President and Chief Sales Officer, and Max Connick, 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. 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 1 September 2026, at midnight Central Time.

Speaker #2: The call will last for up to 1 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.

Speaker #2: Today's conference call is a proprietary FastenAll presentation and is being recorded by FastenAll; no recording, reproduction, transmission, or distribution of today's call is permitted without FastenAll's consent.

Dray Schreiber: 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. 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 1 September 2026, at midnight Central Time.

Speaker #2: This call is being audio-simulcast on the internet via the FastenAll Investor Relations homepage, investor.fastenall.com. A replay of the webcast will be available on the website until September 1, 2026, at midnight Central Time.

Jeff M. Watts: Greetings, and welcome to the Fastenal Q2 2026 earnings results call. At this time, I'm opening the floor for questions. Operators, can you please open the lines for questioning? Maybe participants can unmute themselves and introduce themselves and their affiliation. We ask participants to limit all questions to queue. As a reminder, this conference is being recorded. If anyone wants to require our operator assistance, please press star zero. Is somebody on my agenda to pull over? To Dray Schreiber. Go ahead, Dray.

Speaker #1: At this call. At this time, all participants are in time, I'll be the Spencer you're listening to listening remote. Quick question: remote. First question: is the is the session being followed with formal session you followed with formal presentation?

Speaker #1: Greetings. And welcome to the Greetings. And welcome to the FASTENAL CO Q2 FASTENAL CO Q2 2026 earnings 2026 earnings results conference results conference call.

Speaker #2: 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.

Dray Schreiber: 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 those factors carefully. I would now like to turn the call over to Mr. Jeff Watts.

Speaker #1: You may be placed into presentation? You may be placed into questioning questioning queued at any time by pressing queued at any time by pressing star 1 on *1 in your telephone keypad, and we your telephone keypad, and we ask you to ask you to please ask one question in one please ask one question in one follow-up follow-up and return to the and return to the queue.

Speaker #2: 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, in periodic filings with the Securities and Exchange Commission, and we encourage you to review those factors carefully.

Dray Schreiber: 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 those factors carefully. I would now like to turn the call over to Mr. Jeff Watts.

Speaker #1: As queue. As a reminder, this conference is being a reminder, this conference is being recorded. If anyone should recorded. If anyone should require require update or assistance, please press update or assistance, please press star *0.

Speaker #1: Please go ahead, Dray. Dray.

Dray Schreiber: Welcome to the Fastenal 2026 second quarter earnings conference call. This call will be hosted by Dan Florness, our Chief Executive Officer, Jeff Watts, the President and Chief Sales Officer, and Max Tunnicliff, our Chief Financial Officer. The call will last for 1 hour, and is structured with an overview of our quarterly results, operations, with a review of the timing of questions and answers. Today's conference call as well as presentation is being recorded by Fastenal. No reprogramming, reproduction, transmission, or distribution of today's call is permitted without Fastenal's consent. This call is being made available on the Internet at the Fastenal Investor Relations page, investor.fastenal.com. A replay of the webcast will be available on the website 1 September 2026, midnight Eastern Time. As a reminder, this conference call may contain statements regarding future plans and prospects.

Speaker #2: I would now like to tell the turn the call over to Mr. Jeff Watts.

Speaker #1: It's not my pleasure 0. It's not my pleasure to turn the call to turn the call over to Dre Schreiber. over to Dre Schreiber.

Speaker #2: This call will be hosted by Dan Florness, our Chief Executive Officer, by Dan Florness, our Chief Executive Officer, Jeff Watts, our President and Chief Jeff Watts, our President and Chief Sales Sales Officer, and Max Honeglich, our Officer, and Max Honeglich, our Chief Chief Financial Officer.

Speaker #3: Thank you. Good morning, everyone. Welcome to FastenAll Q2 2026 earnings call. I'm Jeff Watts, FastenAll's President and Chief Sales Officer, and I appreciate you joining us all today.

Jeff Watts: Thank you. Good morning, everyone. Welcome to Fastenal's Q2 2026 earnings call. I'm Jeff Watts, Fastenal's President and Chief Sales Officer, and I appreciate you joining us all today. Before I turn to the results, I would like to take a moment on something that I think matters to everyone on the line, and that is that today will be Dan Florness' final earnings call as our CEO. Dan joined Fastenal, joined the Blue Team, back in June 1996, and he's been the steady voice explaining our business to this community for the past three decades, first as our Chief Financial Officer and then as our President and CEO. Through multiple cycles, multiple recessions, a pandemic, trade shift, stock splits, through all of it, Dan's always had the same candor, the same humility, and the same unwavering respect for our people and for our shareholders.

Speaker #2: Welcome to the FASTENAL CO Welcome to the FASTENAL CO 2026 Q2 earnings 2026 second quarter earnings conference conference call. This call will be hosted call.

Speaker #3: Before I turn to the results, I would like to take a moment and on something that I think matters to everyone on the line, and that is that today will be Dan Florinis's final earnings call as our CEO.

Speaker #2: The call will Financial Officer. The call will last for up to last for up to 1 hour, and we'll start with a general 1 hour, and we'll start with a general overview of overview of our quarterly results and our quarterly results and operations, with operations, with the remainder of the time being open for the remainder of the time being open for questions and questions and answers.

Speaker #2: Today's answers. Today's conference call is conference call is a proprietary FASTENAL a proprietary FASTENAL presentation and is being presentation and is being recorded by FASTENAL.

Speaker #3: And Dan joined FastenAll, joined the blue team, back in June of 1996, and he's been the steady voice explaining our business to this community for the past 3 decades.

Jeff Watts: Dan joined Fastenal, joined the Blue Team, back in June 1996, and he's been the steady voice explaining our business to this community for the past three decades, first as our Chief Financial Officer and then as our President and CEO. Through multiple cycles, multiple recessions, a pandemic, trade shift, stock splits, through all of it, Dan's always had the same candor, the same humility, and the same unwavering respect for our people and for our shareholders.

Speaker #2: No recorded by FASTENAL. No recording, reproduction, transmission, recording, reproduction, or distribution of today's call is permitted without transmission, or distribution of today's call is permitted without FASTENAL's consent.

Speaker #2: FASTENAL Investor Relations homepage, A replay of the webcast will be available on investor.fastenal.com. A replay of the webcast will be available on the website the website until September 1, until September 1, 2026, at 2026, at midnight Central Time.

Speaker #3: First is our Chief Financial Officer, and then is our President and CEO. Through multiple cycles, multiple recessions, a pandemic, trade shift, stock splits. Through all of it, Dan's always had the same candor, the same humility, and the same unwavering respect for our people and for our shareholders.

Speaker #2: This FASTENAL's consent. This call is being call is being audio simultaneous on the internet audio simultaneous on the internet via the via the FASTENAL Investor Relations homepage, investor.fastenal.com.

Speaker #2: These statements are based on our current expectations, prospects. These statements are based on our current and we undertake no duties to update them. It is important to note that the company's actual results may differ materially from those anticipated.

Dray Schreiber: These statements are based on current expectations, and we undertake no duty to update them. It is important to note that the company's actual results could materially differ from those indicated. Fastenal discusses actual results from performance measures selected by the company in its earnings release, periodic filings with the Securities and Exchange Commission, and we encourage you to review those facts carefully. I would now like to turn the call over to Jeff Watts.

Speaker #2: As a midnight Central Time. As a reminder, reminder, today's conference call may include statements today's conference call may include statements regarding the regarding the company's future plans and company's future plans and prospects.

Speaker #3: So to Dan, on behalf of every employee at FastenAll and every shareholder on the line, thank you for the leadership. Thank you for the discipline, and thank you for handing us a business that's stronger today than it's ever been.

Jeff Watts: To Dan, on behalf of every employee at Fastenal and every shareholder on the line, thank you for the leadership, thank you for the discipline, and thank you for handing us a business as strong today than it's ever been. With that said, today isn't a farewell speech, it's an earnings call, and the best way I know how to honor Dan's last call is to walk you through a business that's executing. Moving to our results. Q2 was a very strong, high-quality quarter for the company. Solid double-digit daily sales growth, operating margin expansion, return on invested capital at a decade-plus high, and strong cash generation deployed with the discipline that defines this company. Our strategy is working, and it's showing in the numbers. Turning to slide three.

Speaker #2: 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 those factors carefully.

Speaker #2: 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 Thank you.

Speaker #2: I would now like to call the turn the call over to Mr. Jeff update them. Watts.

Speaker #3: Now, with that said, today isn't a farewell speech. It's an earnings call, and the best way to know how to honor Dan's last call is to walk you through a business that's executing.

Speaker #2: commission, and we encourage you to review those factors carefully. I would now like to call to please turn the call over to Mr. Jeff Watts.

Jeff M. Watts: Thank you. Good morning, everyone. Welcome to Fastenal's Q2 2026 earnings call. I'm Jeff Watts, Fastenal's President and Chief Sales Officer, and I'm happy to be joining the call today. Before I turn to results, I would like to take a moment on things as much as everyone on the line, and that is today will be Dan Florness' final earnings call as our CEO. As Dan joined Fastenal from the Blue Team back in June 1996, he's been a steady voice planning our business through the past decade. First as Chief Financial Officer, then as our President and CEO. Through most cycles, a recession, a pandemic, trade tariffs, stock deficits. Through all of it, Dan's always had the same demeanor, the same humility, the same unbelievable respect for our people and for our shareholders.

Speaker #3: Good morning, everyone. Thank you. Good morning, everyone. Welcome to the FASTENAL Q2 Welcome to the FASTENAL second quarter 2026 earnings call. I'm 2026 earnings call.

Speaker #3: So moving to our results. Now, Q2 was a very strong, high-quality quarter for the company. Solid double-digit daily sales growth, operating margin expansion, return on invested capital at a decade-plus high, and strong cash generation.

Jeff Watts: Moving to our results. Q2 was a very strong, high-quality quarter for the company. Solid double-digit daily sales growth, operating margin expansion, return on invested capital at a decade-plus high, and strong cash generation deployed with the discipline that defines this company. Our strategy is working, and it's showing in the numbers. Turning to slide three.

Speaker #3: I'm Jeff Jeff Watts, FASTENAL's President and Chief Sales Watts, FASTENAL's President and Chief Sales Officer, and Officer, and I appreciate you joining us all I appreciate you joining us all today.

Speaker #3: Before I turn to the today. Before I turn to the results, I would results, I would like to take a moment like to take a moment and on and on something that I think matters to everyone on something that I think matters to everyone on the line, the line, and that is that today will and that is that today will be Dan Florness's final earnings be Dan Florness's final earnings call as our call as our CEO.

Speaker #3: Deployed with the discipline that defines this company. Our strategy is working, and it's showing in the numbers. So turning to side 3. Now, on the top line, daily sales grew 14.7% in the quarter, extending the pathway we built in Q1.

Speaker #3: CEO. As Dan joined FASTENAL during the As Dan joined FASTENAL during the Blue Blue Team back in June Team back in June of of 1996, he's been the 1996, he's been the steady voice steady voice explaining our business to this community for explaining our business to this community for the past three the past three decades.

Jeff Watts: On the top line, daily sales grew 14.7% in the quarter, extending the path we rebuilt in Q1. Market conditions improved at a pace similar to last quarter, but what's important to point out is that our outperformance continues to be driven by share gains and not by the market backdrop. That share gain is showing right up across all three of the pillars you see on the slide. First, increasing sales effectiveness. Share gains driven by our key account strategy and by continued new contract wins. Second, enhancing our services, expanding our FMI device base and our Digital Footprint, improving the customer experience, driving retention, and creating operating efficiencies in the process. Third, expanding our addressable market. Growth driven by new customer site wins and deeper penetration across every one of our end market segments. On pricing.

Speaker #3: Now, market conditions improved at a pace similar to last quarter, but what's important to point out is that our outperformance continues to be driven by share gains, and not by the market backdrop.

Speaker #3: Through multiple cycles, multiple cycles, multiple recessions, recessions, a pandemic, trade a pandemic, trade shift, shift, stock splits, through all of stock splits, through all of it, Dan's always had the same it, Dan's always had the same candor, the candor, the same humility, and the same same humility, and the same unwavering unwavering respect for our people and for respect for our people and for our our shareholders.

Speaker #3: First, decades. First, their key, our Chief Financial Officer—known as our findings were observed—and as our President and CEO, through multiple CEOs.

Speaker #3: And that share gain is showing right up across all 3 of the pillars you see on the slide. First, increasing sales effectiveness. Share gains driven by our key account strategy and by continued new contract wins.

Jeff Watts: First, increasing sales effectiveness. Share gains driven by our key account strategy and by continued new contract wins. Second, enhancing our services, expanding our FMI device base and our Digital Footprint, improving the customer experience, driving retention, and creating operating efficiencies in the process. Third, expanding our addressable market. Growth driven by new customer site wins and deeper penetration across every one of our end market segments. On pricing.

Jeff M. Watts: To Dan, on behalf of every employee at Fastenal and every shareholder on the line, thank you for your leadership, thank you for your discipline, and thank you for handing the business stronger than it has ever been.

Speaker #3: So to Dan, shareholders. So to Dan, on behalf of on behalf of every employee at FASTENAL and every employee at FASTENAL and every every shareholder on the line, thank you for shareholder on the line, thank you for the the leadership.

Speaker #3: Second, enhancing our services. Expanding our FMI device base and our digital footprint. Improving the customer experience. Driving retention and creating operating efficiencies in the process.

Speaker #3: Thank you for the leadership. Thank you for the discipline and discipline and thank you for handing us a business that's thank you for handing us a business that's strong strong today than it's ever today than it's ever been.

Dan L. Florness: Now with that said, today's results speak to learning all. The best way to know how to dance last is to watch your business execute. Moving to our results. Q2 was a very strong holiday quarter for our company. Solid double-digit sales growth, operating margin expansion, return on invested capital, a decade plus high, and strong cash generation. Lloyd said that the discipline defines this company. Our strategy is working and showing in the numbers. Turning to slide three. Now on the top line, daily sales grew 14.7% in the quarter, extending the path we built in Q1. Now margin conditions improved at a pace similar to last quarter, it is important to point out that our outperformance is continued driven by Share Gain, not by margin backdrop. That Share Gain is going right up across all three of the pillars listed on the slide.

Speaker #3: And then third, expanding our addressable market. Growth driven by new customer site wins and deeper penetration across every one of our end market segments.

Speaker #3: Now, with that been. Now, with that said, today isn't a farewell speech. It's said, today isn't a farewell speech. It's an earnings an earnings call, and the best way to know how call, and the best way to know how to honor to honor Dan's last call is to walk you through Dan's last call is to walk you through a business a business that's executing.

Speaker #3: that's executing. So moving to So moving to our results. Now, our results. Now, Q2 was Q2 was a very strong a very strong high-quality quarter for high-quality quarter for the company.

Speaker #3: Now, on pricing. And we realize approximately 2.9% in the quarter, or about 4.5% on a stacked basis versus roughly 3.5% in Q1. Now, the sequential step-down, it's not a change in posture.

Jeff Watts: We realized approximately 2.9% in the quarter or above 4.5% on a stack basis versus roughly 3.5% in Q1. The sequential step down, it's not a change in posture, it's simply lapping the onset of pricing actions we took in Q2 of last year. Our pricing actions to mitigate cost and tariff inflation continue, and our pricing discipline continues right alongside them. I know Max is going to touch a little deeper on this later in the deck. One number I want you to focus on this quarter, and it's the customer site stat on the right side of the slide. Our contract count in Q2 is up over 7% year over year, and the number of customer sites spending $50,000 or more per month grew at 16.5% over last year, with revenues growing over 26%.

Speaker #3: Solid the company. Solid double-digit double-digit daily sales growth, daily sales growth, operating margin expansion, return on invested operating margin expansion, return on invested capital a capital at a decade-plus decade-plus high, and strong cash high, and strong cash generation.

Speaker #3: It's simply lapping the onset of pricing actions we took in Q2 of last year. Now, our pricing actions to mitigate costs and tariff inflation continue and our pricing discipline continues right alongside them.

Speaker #3: Deployed with the generation. Deployed with the discipline that discipline that defines this company. Our defines this company. Our strategy strategy is working, and it's showing in the is working, and it's showing in the numbers.

Jeff Watts: Our pricing actions to mitigate cost and tariff inflation continue, and our pricing discipline continues right alongside them. I know Max is going to touch a little deeper on this later in the deck. One number I want you to focus on this quarter, and it's the customer site stat on the right side of the slide. Our contract count in Q2 is up over 7% year over year, and the number of customer sites spending $50,000 or more per month grew at 16.5% over last year, with revenues growing over 26%.

Speaker #3: So turning to numbers. So turning to slide slide 3. Now, on the top 3. Now, on the top line, line, daily sales grew daily sales grew 14.7% in the 14.7% in the quarter, extending the path quarter, extending the pathway we built we've built in Q1.

Speaker #3: I know Max is going to touch a little deeper on this later in the deck. So now, one number I want you to focus on this quarter, and it's the customer site data on the right side of the slide.

Speaker #3: Now, in Q1. Now, market market conditions improved at a conditions improved at a pace similar pace similar to last quarter, but what's important to last quarter, but what's important to point out to point out is that our is that our outperformance outperformance continues to be driven by share continues to be driven by share gains and not by gains and not by the market backdrop.

Speaker #3: the market backdrop. And that And that share gain is going right up share gain is going right up across across all three of the pillars you see on the all three of the pillars you see on the slide.

Speaker #3: And our contract count in Q2 is up over 7% year over year, and the number of customer site spending 50,000 dollars or more per month grew 16.5% over last year, with revenues growing over 26%.

Jeff M. Watts: First, increasing sales by customers. Share Gain driven by our account strategy, like continued contract wins. Second, enhancing our services, expanding our optimized device-based digital footprint, improving the customer experience, driving margin, and getting operating efficiencies in the process. Third, expanding our addressable market, growth driven by new customer site wins and deeper penetration across every one of our end markets segments. Now on pricing. We realized approximately 2.9% in the quarter or about 0.5% on an exact basis versus roughly 1.5% in Q1. Now the sequential step down, it is not a change in posture here, simply laps on the pricing action we took in Q2 of last year. Now our pricing actions to mitigate cost pressure will continue, and our pricing discipline continues right along with it. Omar can get into touch on the details later in the deck.

Speaker #3: First, increasing sales slide. First, increasing sales effectiveness. Share gains driven by effectiveness. Share gains driven by our key our key account strategy and by account strategy and by continued new continued new contract contract wins.

Speaker #3: Second, wins. Second, enhancing our enhancing our services. services. Expanding our FMI device base Expanding our FMI device base and our digital and our digital footprint.

Speaker #3: Now, that's the shape of durable, high-quality revenue. Larger customers, deeper contracts, and higher productivity per site. It's exactly what our key account strategy is assigned to produce, and it's the foundation of the momentum we're using to carry into the second half of this year.

Jeff Watts: That's the shape of durable, high-quality revenue: larger customers, deeper contracts, and higher productivity per site. Exactly what our key account strategy is designed to produce, and it's the foundation of the momentum we're using to carry into the H2 of this year. That momentum is being reinforced and scaled by our technology platform. Moving to slide four, which is our technology update. This is where the enhancing our services pillar comes to life in the numbers. Starting with Digital Footprint. Digital Footprint DSR grew 16.2% in Q2, outpacing total company DSR, and now represents 61.6% of total sales, up 60 basis points from last year. Our estimate for 2026 is 63% to 64%, modestly below our original target of 66%. I want to be clear, though, on what this reflects. We're not slowing down on digital adoption.

Speaker #3: Improving the footprint, improving the customer customer experience. Driving retention experience, driving retention, and and creating operating efficiencies in the creating operating efficiencies in the process.

Speaker #3: And that momentum is being reinforced and scaled by our technology platform. So moving to slide 4, which is our technology update. And this is where the enhancing our services pillar comes to life in the numbers.

Speaker #3: And then process. And then third, expanding third, expanding our addressable our addressable market. market. Growth driven by new customer Growth driven by new customer site wins and site wins and deeper penetration across deeper penetration across every one of every one of our end market our end market segments.

Jeff Watts: Moving to slide four, which is our technology update. This is where the enhancing our services pillar comes to life in the numbers. Starting with Digital Footprint. Digital Footprint DSR grew 16.2% in Q2, outpacing total company DSR, and now represents 61.6% of total sales, up 60 basis points from last year. Our estimate for 2026 is 63% to 64%, modestly below our original target of 66%. I want to be clear, though, on what this reflects. We're not slowing down on digital adoption.

Speaker #3: segments. Now, on Now, on pricing. Now, we pricing. And we realize approximately realize approximately $2.9% 2.9% in the quarter, or about in the quarter, or about $4.5% 4.5% on the stacked basis versus on the stacked basis versus roughly roughly 3.5% in $3.5% in Q1.

Speaker #3: Now, starting with digital footprint. Digital footprint, DSR, grew 16.2% in Q2, outpacing total company DSR, and now represents 61.6% of total sales, up 60 basis points from last year.

Speaker #3: Now, Q1. Now, the sequential step-down the sequential step-down is not a is not a change in posture. It's change in posture. It's simply lapping simply lapping the onset of pricing actions the onset of pricing actions we took in we took in Q2 of last year.

Speaker #3: Q2 of last year. Now, our Now, our pricing actions to mitigate pricing actions to mitigate cost and drive costs and driven inflation continue and our inflation continue and our pricing pricing discipline continues right alongside discipline continues right alongside them.

Speaker #3: Now, our estimate for '26 is 63 to 64%, modestly below our original target of 66, and I want to be clear though on what this reflects.

Speaker #3: this later in the deck. So So now, one number I want you to focus now, one number I want you to focus on this on this quarter is the quarter is the customer site data customer site data on the right side of the on the right side of the slide, and slide, and our contract count in Q2 is up our contract count in Q2 was up over over 7% year over year, 7% year-over-year and the number and the number of customer site of customer site spending spending $50,000 or more per month $50,000 or more per month grew at grew at 16.5% over last 16.5% over last year, with year, with revenues growing over revenues growing over $26%.

Jeff M. Watts: Now one number I have been wanting to focus on this quarter is the customer site count on the right side of the slide. Contracted count was up 17% year over year, and the number of customer sites spending $50,000 or more month-on-month grew at 16.5% over last year, with revenue growing over 20%. Now that is the shape of durable high-quality revenue, larger customers, deeper contracts, and higher productivity per site. Exactly what our account strategy is designed to do. It is the foundation of the momentum we have been seeing during the H2 of this year. That momentum is being reinforced in sales by our technology platform. Moving to slide four, which is our technology update, this quarter again enhancing our service pillars came through like in the numbers. Now starting with digital print.

Speaker #3: them. I know Max is going to need to touch a little I know Max, we're going to need to touch a little deeper on deeper on this later in the deck.

Speaker #3: We're not slowing down on digital adoption. We're still driving customers to digital at a very strong pace. It's really the denominator is simply moving faster, because our non-digital sales are growing right alongside digital, as we take share and add larger and larger customer sites.

Jeff Watts: We're still driving customers to digital at a very strong pace. It's really the denominator is simply moving faster because our non-digital sales are growing right alongside digital as we take share and add larger and larger customer sites. To me, I guess that's a healthy problem to have. Inside that, though, eBusiness DSR grew 12.6%, steady and disciplined digital engagement that continues to broaden our reach with both new and existing customers. Turning to FMI, the engine of our services strategy. FMI technology signings were up 8.3% at 109 weighted devices signed per day in Q2, just under 7,000 total for the quarter, versus 101 per day or just under 6,500 total same time period last year. FMI sales now represents 44.6% of total sales, up roughly 60 basis points from a year ago.

Speaker #3: And to me, I guess that's a healthy problem to have. Inside that, though, e-business DSR grew 12.6%, steady and disciplined digital engagement that continues to broaden our reach with both new and existing customers.

Speaker #3: Now, that's the shape $26%. Now, that's the shape of of durable, high-quality durable, high-quality revenue. revenue. Larger customers, Larger customers, deeper deeper contracts, and higher contracts, and higher productivity per productivity per site.

Speaker #3: It's exactly what site. It's exactly what our key our key account strategy is designed to account strategy is designed to produce, and produce, and it's the foundation of a model it's the foundation of a model we're using to we're using to carry into the second half of this carry into the second half of this year.

Speaker #3: Now, turning to FMI, the engine of our services strategy. FMI technology signings, we're up 8.3% at 109 weighted devices signed per day in Q2, just under 7,000 total for the quarter.

Jeff Watts: Turning to FMI, the engine of our services strategy. FMI technology signings were up 8.3% at 109 weighted devices signed per day in Q2, just under 7,000 total for the quarter, versus 101 per day or just under 6,500 total same time period last year. FMI sales now represents 44.6% of total sales, up roughly 60 basis points from a year ago.

Speaker #3: So moving to slide 4, slide 4, which is which is our our technology update. And this is technology update. And this is where the where the enhancing our services pillar comes enhancing our services pillar comes to life in the to life in the numbers.

Speaker #3: And that momentum is year. And that momentum is being being reinforced and scaled by our reinforced in scale by our technology technology platform. So moving to platform.

Speaker #3: Versus 101 per day or just under 6,500 total, same time period last year. FMI now, sales now represent 44.6% of total sales, up roughly 60 basis points from a year ago.

Jeff M. Watts: Digital footprint grew SR to 16.3% Q2, outpacing total group and DSR, and now represents 1.6% of total sales, up 60 basis from last year. Now at 26.6%, 63%, 64%, modest below our original target of 66%. I want to be clear on the flip chart. We're not going down the digital adoption. We're still driving customer digital at a very strong pace. It's really the denominator is moving faster because our non-digital sales grow right alongside digital as we take care of larger and larger customer sites. To me, I get the health of that. Inside that, e-biz DSR grew 12.6%, steady as discipline in digital engagement continues to drive revenue to our portfolio and existing customers. Now turning to FMI, the engine of our service strategy.

Speaker #3: Now, starting numbers. Now, starting with digital with digital footprint. Digital footprint. Digital footprint footprint DSR grew DSR grew 16.2% in 16.2% in Q2, outpacing total Q2, outpacing total company company DSR, and now DSR, and now represents represents 51.6% of total 61.6% of total sales, sales, up 60 basis points from last up 60 basis points from last year.

Speaker #3: When I think about this, every one of these technology metrics, it's really a leading deposits into next quarter's sales, into next year's retention, and into the operational rigor and efficiency that show up in our margin structure.

Jeff Watts: When I think about this, every one of these technology metrics, it's really a leading indicator. Devices installed today are deposits into next quarter's sales, into next year's retention, and into the operational rigor and efficiency that show up in our margin structure. Fastenal has never had more contract customers, more large customer sites, more devices in the field, or more digital engagement than we do today. This is what durable, scalable growth looks like and why we're so confident in our pathway forward. With that, I'll turn it over to Max.

Speaker #3: Now, our estimates are year. Now, our estimates for '26 is 26 is 53 to 63 to 64%, 64%, modestly below our modestly below our original original target of 66, and I target of 66, and I want to be want to be clear though on what this clear though on what this reflects.

Speaker #3: We're reflects. We're not slowing down on digital not slowing down on digital adoption. adoption. We're still driving customers with We're still driving customers with digital at a digital at a very strong pace.

Speaker #3: Now, FastenAll has never had more contract customers, more large customer sites, more devices in the field, or more digital engagement than we do today.

Speaker #3: It's very strong pace. It's really the denominator of really the denominator of something moving something moving faster because our faster because our non-digital non-digital sales are growing right alongside sales are growing right alongside digital digital as we take share and add as we take share and add larger and larger and larger customer sites.

Speaker #3: This is what durable, scalable growth looks like, and why we're so confident in our pathway forward. And with that, I'll turn it over to Max.

Speaker #3: Inside that though, e-business DSR grew e-business DSR grew 12.6%, steady and 12.6%, steady in discipline, disciplined digital engagement that continues to digital engagement that continues to broaden our broaden our reach with both new and existing reach with both new and existing customers.

Speaker #2: Thank you, Jeff. And good morning, everyone. As in the past, I'll review 3 areas with you this morning. The business trends we saw in the quarter, the key drivers of margin performance, and how those results translate into cash flow and capital allocation.

Max Tunnicliff: Thank you, Jeff, and good morning, everyone. As in the past, I'll review three areas with you this morning: the business trends we saw in the quarter, the key drivers of margin performance, and how those results translate into cash flow and capital allocation. Overall, the quarter showed continued progress against our strategy, improving demand trends, solid execution across the business, and strong cash generation, even with continued uncertainty in the broader economy. I'll start on the business trends and market drivers slide. During Q2, the industrial environment remained stable and modestly positive, consistent with the trend we saw in Q1. US PMI averaged slightly above 53 for the quarter, up from 52 last quarter, and industrial production was slightly positive year-over-year in April and May. This lines up with the gradual improvement that started late last year.

Speaker #3: To larger customer sites. To me, I guess that's me, I guess that's a healthy problem to a healthy problem to have. Inside that, though, have.

Speaker #3: customers. Now, Now, turning to FMI, the turning to FMI, the engine of engine of our services strategy. our services strategy. Now, FMI FMI technology spending is roughly technology findings were up 8.3% at 8.3% at 109 weighted $109 weighted devices time per day in devices time per day in Q2, just Q2, just under $7,400 for the under 7,004 for the quarter, versus $101 per quarter, versus 101 per day or just day or just under $6,500 in under 6,500 in total, same total, same time period last time period last year.

Jeff M. Watts: FMI technology remains well above 50% at 109 weighted by site sign dates to just under 2,400 for the quarter versus 101 a day or 2,600 total same time period last year. FMI now sales now represent 44.6% of total sales, up roughly 50 basis from a year ago. I think this is every one of these technologies in FMI contribute really at the unit level. The devices sold today are positive to next quarter's sales and to next quarter's retention, and it's the operational efficiencies that show up in margin structure. Now FAST Talk has never been more on-trend for customers or large customer sites where the devices yield more digital engagement than we do today. This is what durable sales growth looks like and why we're confident in our outlook going forward. With that, turn it over to Omar.

Speaker #2: Overall, the quarter showed continued progress against our strategy. Improving demand trends, solid execution across the business, and strong cash generation. Even with continued uncertainty in the broader economy.

Speaker #2: I'll start in the business trends and market drivers slide. During the second quarter, the industrial environment remained stable and modestly positive. Consistent with the trend we saw in the first quarter.

Max Tunnicliff: I'll start on the business trends and market drivers slide. During Q2, the industrial environment remained stable and modestly positive, consistent with the trend we saw in Q1. US PMI averaged slightly above 53 for the quarter, up from 52 last quarter, and industrial production was slightly positive year-over-year in April and May. This lines up with the gradual improvement that started late last year.

Speaker #3: year. FMI now sales FMI now sales now now represents represents 44.6% of 44.6% of total sales, up roughly total sales, up roughly 60 basis 60 basis points from a year points from a year ago.

Speaker #3: When I ago. When I think about this, every one of these think about this, every one of these technology metrics is really a technology metrics is really a leading leading indicator.

Speaker #2: US PMI averaged slightly above 53 for the quarter, up from 52 last quarter. And industrial production was slightly positive year over year in April and May.

Speaker #3: Devices indicator. Devices installed installed today are deposits in the next today are deposits in the next quarter's quarter's sales, and to next year's sales, into next year's retention, and retention, and into the operational rigor and into the operational rigor and efficiency efficiency that show up in our margin that show up in our margin structure.

Speaker #2: This lines up with the gradual improvement that started late last year. Our daily sales, growth improved to 14.7 for the quarter, up from 12.4 in the first quarter.

Max Tunnicliff: Our daily sales growth improved to 14.7 for the quarter, up from 12.4 in Q1, reflecting continued market outperformance. Growth was supported by new customer wins, increased share of wallet with existing customers, pricing, and improved industrial production. Importantly, the improvement was not concentrated in any one area. It showed up across customer types and markets. Customer sentiment remained favorable throughout the quarter. While trade and tariffs uncertainty stayed in the picture, its impact this quarter showed up through cost planning and pricing discussions rather than demand. As a result, activity levels remained healthy, and our teams continue to see strong customer engagement. From an end market perspective, this slide shows the breadth of that improvement. Manufacturing activity remained solid, led by heavy manufacturing, where our faster expansion and key account momentum continued to pay off.

Speaker #3: Now, structure. Now, FASTENAL has never FASTENAL has never had more contract had more contract customers, customers, more large customer sites, more large customer sites, more more devices in the field, or more digital devices in the field, or more digital engagement than we do engagement than we do today.

Speaker #3: This is today. This is what durable, scalable what durable, scalable growth looks growth looks like, and why we're so confident like, and why we're so confident in our in our pathway forward.

Speaker #2: Reflecting continued market outperformance. Growth was supported by new customer wins, increased share of wallet with existing customers, pricing, and improved industrial production. Importantly, the improvement was not concentrated in any one area.

Speaker #3: to Max.

Speaker #2: Thank you, Jeff. Jeff. And good morning, everyone.

Max H. Tunnicliff: Thank you, Jeff. Good morning, everyone. As was asked, I'll review three areas with you this morning. The business trends we saw in the quarter, the key drivers of margin performance, and how those results translate into cash flow and capital allocation. Overall, the quarter shows continued progress in our strategy, improving demand trends, solid execution across the business, and strong cash generation, even with continued uncertainty in the broader economy. I'll start with the trends in the marketplace slide. During this quarter, the industrial environment remained stable and modestly positive, consistent with the trends we saw in Q1. US PMI averaged slightly above 53.4, up from 50 last quarter, and industrial production remained positive year-over-year in April and May. This lines up gradual improvement that started late last year.

Speaker #3: And good morning, everyone. As in the

Speaker #3: past, I'll review three areas with

Speaker #3: And with that, pathway forward. And with that, I'll turn it over I'll turn it over to Max.

Speaker #3: you this morning. The business trends we

Speaker #2: Thank you,

Speaker #3: saw in the quarter, the key drivers,

Speaker #2: It showed up across customer types and markets. Customer sentiment remained favorable throughout the quarter. While trade and tariff uncertainty stayed in the picture, its impact this quarter showed up through cost planning and pricing discussions rather than demand.

Speaker #3: of margin performance, and how those

Speaker #2: As in the past, I'll review three

Speaker #2: areas with you this morning. The business

Speaker #3: results translate into cash flow, and

Speaker #2: trends we saw in the quarter, the key

Speaker #3: capital allocation.

Max Tunnicliff: While trade and tariffs uncertainty stayed in the picture, its impact this quarter showed up through cost planning and pricing discussions rather than demand. As a result, activity levels remained healthy, and our teams continue to see strong customer engagement. From an end market perspective, this slide shows the breadth of that improvement. Manufacturing activity remained solid, led by heavy manufacturing, where our faster expansion and key account momentum continued to pay off.

Speaker #3: Overall, the quarter showed continued progress.

Speaker #2: drivers of margin performance, and how,

Speaker #3: against our strategy. Improving

Speaker #2: those results translate into

Speaker #2: cash flow and capital

Speaker #3: demand trends, solid execution

Speaker #2: allocation. Overall, the quarter showed continued

Speaker #3: across the business, and strong

Speaker #2: As a result, activity levels remained healthy, and our teams continued to see strong customer engagement. From an end market perspective, this slide shows the breadth of that improvement.

Speaker #3: cash generation. Even with

Speaker #2: progress against our strategy.

Speaker #3: continued uncertainty in the broader

Speaker #2: Improving demand trends,

Speaker #3: economy. I'll start with the business trends and

Speaker #2: solid execution across the business, and

Speaker #2: strong cash generation. Even

Speaker #3: market drivers side. During the

Speaker #3: second quarter, the industrial environment

Speaker #2: with continued uncertainty in the broader

Speaker #2: Manufacturing activity remained solid, led by heavy manufacturing. Where our faster expansion in key account momentum continued to pay off. Heavy manufacturing represented 44% of total sales, an average daily sales growth in that segment was 18.

Speaker #3: remained stable and modestly

Speaker #2: economy. I'll start on the

Speaker #3: positive, consistent with the trend we saw in the first

Speaker #2: Business trends and market drivers side.

Speaker #3: quarter. The US PMI

Speaker #2: During the second quarter, the industrial...

Speaker #2: environment remained stable and modestly

Speaker #3: averaged slightly above 53 for the

Speaker #3: quarter, up from 52 last

Speaker #2: positive, consistent with the trend we saw

Max Tunnicliff: Heavy manufacturing represented 44% of total sales, average daily sales growth in that segment was 18, continuing the upward trend that began last year. Construction grew approximately 17% for the Q2 in a row, representing a meaningful improvement from weaker trends we saw in prior periods. Within construction, electrical, utility, infrastructure, and data center-related activity were among the strongest areas of demand during the quarter. Non-manufacturing end markets also contributed, with gains across transportation, warehousing, and other industrial services as demand improved across customer types. Across materials, both direct and indirect categories grew in the mid-teens, with direct materials slightly outpacing indirect. That mix reinforces that growth was tied to customer production activity and supported by higher Fastenal penetration, improved product availability, and pricing actions. The common thread across the strongest areas was larger customer engagement and project-related activity, which continues to support our key account strategy.

Speaker #3: quarter. And industrial production was slightly

Speaker #2: in the first quarter, the U.S.

Speaker #2: PMI averaged slightly above 53

Speaker #3: positive year over year in April and

Speaker #3: May. This lines up with the gradual

Speaker #2: for the quarter, up from 52.

Speaker #2: Continuing the upward trend that began last year. Construction grew approximately 17% for the second quarter, in a row, representing a meaningful improvement from weaker trends we saw in prior periods.

Speaker #3: improvement that started late last

Speaker #2: last quarter. And industrial production was

Speaker #3: year. Our daily

Speaker #2: slightly positive year over year in April

Max H. Tunnicliff: Our daily sales growth grew to 14.7 for the quarter, up from 12.4 in Q1. Direct connections continued market performance. Growth was driven by new wins, increased share of existing customers, pricing, and improved production. Importantly, the improvement was not concentrated in any one area. It showed up across customer site types and markets. Customer sentiment remained favorable throughout the quarter. While trends here are uncertain even in the future, its impact this quarter showed up through cost containment and pricing discussions rather than demand. As a result, activity levels remained healthy and our team continued to see strong customer engagement. From an end market perspective, the supply situation has led to better improvement. Manufacturing activity remains solid, led by heavy manufacturing, where our customer expansion into account management continues to pay off.

Speaker #3: sales growth improved at

Speaker #2: and May. This lines up with

Speaker #3: 14.7 for the quarter, up from

Speaker #2: a gradual improvement that started

Speaker #3: 12.4 in the first quarter.

Speaker #2: late last year. Our

Speaker #2: daily sales growth improved at

Speaker #3: Reflecting continued market health

Speaker #2: Within construction, electrical, utility, infrastructure, and data center-related activity were among the strongest areas of demand during the quarter. Non-manufacturing and markets also contributed, with gains across transportation, warehousing, and other industrial services as demand improved across customer types.

Speaker #3: performance. Growth was supported by new customer

Speaker #2: 14.7 for the quarter, up

Speaker #2: from 12.4 in the first

Speaker #3: wins, increased share of wallet with

Speaker #2: quarter. Reflecting continued market

Speaker #3: existing customers, pricing,

Speaker #2: health performance. Growth was supported by

Speaker #3: and improved industrial

Speaker #3: production. Importantly, the improvement was

Max Tunnicliff: Non-manufacturing end markets also contributed, with gains across transportation, warehousing, and other industrial services as demand improved across customer types. Across materials, both direct and indirect categories grew in the mid-teens, with direct materials slightly outpacing indirect. That mix reinforces that growth was tied to customer production activity and supported by higher Fastenal penetration, improved product availability, and pricing actions. The common thread across the strongest areas was larger customer engagement and project-related activity, which continues to support our key account strategy.

Speaker #2: new customer wins, increased share of

Speaker #3: not concentrated in any one area.

Speaker #2: wallet with existing customers,

Speaker #2: pricing, and improved industrial

Speaker #3: It showed up across customer type

Speaker #2: production. Importantly, the improvement

Speaker #3: and markets. Customer

Speaker #2: was not concentrated in any one

Speaker #3: sentiment remained favorable throughout the

Speaker #2: Across materials, both direct and indirect categories grew in the mid-teens, with direct materials slightly outpacing indirect. That mix reinforces that growth was tied to customer product production activity and supported by higher faster penetration.

Speaker #3: quarter. While trade and tariffs were uncertainty state in

Speaker #2: area. It showed up across

Speaker #2: customer type spend markets.

Speaker #3: the picture, its impact this quarter

Speaker #2: Customer sentiment remained favorable throughout the

Speaker #3: showed up through cost planning and

Speaker #2: quarter. While trade and tariffs were

Speaker #3: pricing discussions rather than

Speaker #3: demand. As a result, activity

Speaker #2: uncertainty state in the picture, it's

Speaker #2: impact this quarter showed up through cost

Speaker #3: levels remained healthy and our

Speaker #3: teams continued to see strong customer

Speaker #2: planning and pricing discussions rather than

Speaker #3: engagement. From an end market

Speaker #2: Improved product availability and pricing actions. The common thread across the strongest areas was larger customer engagement and project-related activity, which continues to support our key account strategy.

Speaker #2: demand. As a

Speaker #2: result, activity levels remained healthy, and

Speaker #3: From a market perspective, this slide shows the breadth. Market perspective, this slide...

Speaker #2: Our teams continued to see strong customer

Speaker #3: of that improvement.

Speaker #3: Manufacturing activity remained solid, led by

Speaker #2: engagement. From an end

Speaker #3: heavy manufacturing. What our

Speaker #3: FASTER expansion and key account

Speaker #2: shows the breadth of that

Speaker #2: improvement. Manufacturing activity remained

Speaker #2: That said, conditions were not perfectly uniform across all markets. While manufacturing and construction remained healthy, certain other end markets, particularly those tied to discretionary consumer spending, continued to lag.

Max Tunnicliff: That said, conditions were not perfectly uniform across all markets. While manufacturing and construction remained healthy, certain other end markets, particularly those tied to discretionary consumer spending, continued to lag. Overall, demand conditions were stable to modestly positive, while cost inflation remained less predictable. In that environment, our diverse customer base, key account focus, and strategic initiatives helped us convert market stability into stronger growth and continued share gains. Turning now to margin performance and drivers. The key margin story this quarter is that we maintained operating margin, including a 5 basis point improvement, despite inflation-driven pressures. Strong sales growth, SG&A leverage, and disciplined cost control more than offset net price cost headwinds. At the gross margin line, we contracted approximately 75 basis points year over year, with price cost representing roughly 40 basis points headwind. On price cost, we improved approximately 10 basis points from the Q1.

Speaker #3: momentum continued to pay off. Heavy

Speaker #2: solid, led by heavy manufacturing. What

Speaker #3: manufacturing represented 44% of

Max H. Tunnicliff: Heavy manufacturing represented 44% of total sales, and average weekly sales in that segment was 18%, continuing the uptrend that began last year. Construction grew approximately 7% versus the Q2 in a row, representing a meaningful improvement from weaker trends we saw earlier in the period. Within construction, electrical, utility, infrastructure, and facility activity were among the strongest areas in the current quarter. Non-manufacturing end markets also contributed with increases across transportation, warehousing, and other customer service businesses and improved across customer type. Across sales, both direct and indirect categories grew in the mid-teens with direct materials slightly outpacing indirect. That mix improvement led to both higher cost per product connection completed and supported by higher asset utilization, improved product availability, and pricing actions. The combination across these areas was largely engagement and project-related activity, which continues to support our account strategy.

Speaker #3: total sales, an average daily

Speaker #2: our FASTER expansion and key

Speaker #3: sales growth in that segment was

Speaker #2: account momentum continued to pay

Speaker #3: 18. Continuing the upward trend that

Speaker #2: off. Heavy manufacturing represented

Speaker #2: 44% of total sales. That

Speaker #3: began last year. Construction

Speaker #2: Overall, demand conditions were stable to modestly positive, while cost inflation remained less predictable. In that environment, our diverse customer base key account focus and strategic initiatives helped us convert market stability into stronger growth and continued share gains.

Speaker #2: average daily sales growth in that segment was

Speaker #3: grew approximately 17% for the second

Speaker #3: quarter in a row, representing

Speaker #2: 18. Continuing the upward

Speaker #2: trend that began last year.

Speaker #3: a meaningful improvement from weaker

Speaker #3: trends we saw in prior

Speaker #2: Construction grew approximately 17% for the quarter.

Speaker #3: periods. Within construction,

Speaker #2: second quarter, in a

Speaker #2: row, representing a meaningful improvement from

Speaker #3: electrical, utility, infrastructure,

Speaker #3: and data center-related activity were

Speaker #2: weaker trends we saw in prior

Speaker #2: periods. Within

Speaker #3: Among the strongest areas of demand during the—

Speaker #2: construction, electrical, utility,

Speaker #3: quarter. Non-manufacturing and markets

Speaker #2: Turning now to margin performance and drivers. The key margin story this quarter is that we maintained operating margin, including a 5 basis point improvement, despite inflation-driven pressures.

Max Tunnicliff: Turning now to margin performance and drivers. The key margin story this quarter is that we maintained operating margin, including a 5 basis point improvement, despite inflation-driven pressures. Strong sales growth, SG&A leverage, and disciplined cost control more than offset net price cost headwinds. At the gross margin line, we contracted approximately 75 basis points year over year, with price cost representing roughly 40 basis points headwind. On price cost, we improved approximately 10 basis points from the Q1.

Speaker #2: infrastructure, and data center-related

Speaker #3: also contributed, with gains

Speaker #2: activity were among the strongest areas of demand

Speaker #3: across transportation, warehousing,

Speaker #2: during the quarter.

Speaker #3: and other industrial services as demand.

Speaker #2: Non-manufacturing and markets also contributed, with

Speaker #3: improved across customer

Speaker #3: type. Across materials, both

Speaker #2: gains across transportation,

Speaker #2: Strong sales growth, SG&A leverage, and disciplined cost control more than offset net price-cost headwinds. At the gross margin line, we can track that approximately 75 basis points, year over year, with price-cost representing roughly 40 basis points headwind.

Speaker #2: warehousing, and other industrial services as

Speaker #3: direct and indirect categories grew in the

Speaker #3: mid-teens, with direct materials

Speaker #2: demand improved across customer

Speaker #2: types. Across

Speaker #3: slightly outpacing indirect.

Speaker #2: materials, both direct and indirect categories grew in

Speaker #3: That mix reinforces that

Speaker #2: the mid-teens, with direct

Speaker #3: growth was tied to customer

Speaker #3: product production activity and supported by

Speaker #2: materials slightly outpacing

Speaker #2: indirect. That mix

Speaker #3: higher FASTER penetration. Improved

Speaker #2: reinforces that growth was tied to customer

Speaker #3: product availability and pricing

Speaker #2: On price-cost, we improved approximately 10 basis points from the first quarter, our pricing actions helped offset the ongoing impacts of tariffs and other inflation.

Speaker #3: actions. The common thread across the strongest

Speaker #2: product production activity and

Speaker #3: areas was larger customer engagement

Speaker #2: supported by higher FASTER penetration.

Max Tunnicliff: Our pricing actions helped offset the ongoing impacts of tariffs and other inflation. We remain focused on pricing discipline and will continue managing toward price cost neutrality over time. Beyond price cost, we also experienced smaller gross margin headwinds from customer mix, transportation costs, and customer rebates during the quarter. Customer mix impacts are important to emphasize. As we've discussed previously, our customer mix continues to shift toward larger customers by design, as this is part of our strategy. While these customers typically carry lower gross margins, they generate attractive incremental profit dollars and remain accretive to operating margin. The higher volumes associated with these relationships drive fixed cost leverage, improve asset utilization, and create operating efficiencies across our network. As a result, although the mix shift can moderate gross margin percentage, it supports our broader objective of growing absolute profitability and expanding operating margins over time.

Speaker #2: Improved product availability and pricing

Speaker #3: and project-related activity, which

Speaker #2: actions. The common thread across the

Speaker #3: continues to support our key account

Speaker #3: strategy. That said, conditions were

Speaker #2: strongest areas was larger customer

Speaker #2: We remained focused on pricing discipline and will continue managing toward price-cost neutrality over time. Beyond price-cost, we also experienced smaller gross margin headwinds from customer mix, transportation costs, and customer rebates during the quarters.

Max H. Tunnicliff: That said, this is not perfect view across all markets. While manufacturing and construction remain healthy, certain other end markets, particularly those with high discretionary consumer spending, continue to lag. Overall, the main conditions label modifies positive while cost inflation remains less predictable. In that environment, our customer base, key account focus, and strategic initiatives helped us improve our profitability into stronger growth and continued share gains. Turning now to margin and performance drivers. The key margin drivers were the maintenance of operating margin, including high basis point improvement despite inflation driven pressures. Strong sales growth, SG&A leverage, and disciplined cost control more than offset net price headwinds. At the gross margin line, we contracted approximately 75 basis points year over year, with price/cost representing approximately 40 basis points of the headwind. On price/cost, we improved approximately 10 basis points from the Q1.

Speaker #2: engagement and project-related

Speaker #3: not perfectly uniform across all

Speaker #2: activity, which continues to support our key

Speaker #3: markets. While manufacturing and

Speaker #3: Construction remained healthy; certain other end-

Speaker #2: account strategy. That said,

Speaker #3: markets, particularly those tied to

Speaker #2: conditions were not perfectly uniform

Speaker #3: discretionary consumer spending, continued to

Speaker #2: across all markets. While

Speaker #2: Manufacturing and construction remained healthy. Certain

Speaker #3: lag. Overall,

Speaker #3: Demand conditions were stable and modestly.

Speaker #2: other end markets, particularly those tied

Speaker #3: positive, while cost inflation remained less

Speaker #2: Customer mix impacts are important to emphasize. As we've discussed previously, our customer mix continues to shift toward larger customers by design. As this is part of our strategy.

Speaker #2: to discretionary consumer spending,

Speaker #2: continued to lag.

Speaker #3: predictable. In that

Speaker #3: environment, our diverse customer base key

Speaker #2: Overall, demand conditions were stable and modestly improved.

Speaker #2: positive, while cost inflation

Speaker #3: account focus and strategic

Speaker #3: initiatives helped us convert market

Speaker #2: remained less predictable. In that

Speaker #2: environment, our diverse customer

Speaker #3: stability into stronger growth and

Speaker #2: While these customers typically carry lower gross margins, they generate attractive incremental profit dollars and remain accretive to operating margin. The higher volumes associated with these relationships drive fixed-cost leverage, improve asset utilization, and create operating efficiencies across our network.

Max Tunnicliff: While these customers typically carry lower gross margins, they generate attractive incremental profit dollars and remain accretive to operating margin. The higher volumes associated with these relationships drive fixed cost leverage, improve asset utilization, and create operating efficiencies across our network. As a result, although the mix shift can moderate gross margin percentage, it supports our broader objective of growing absolute profitability and expanding operating margins over time.

Speaker #2: base key account focus and

Speaker #3: continued share

Speaker #3: gains. Turning now to margin performance, and

Speaker #2: strategic initiatives helped us convert

Speaker #3: drivers. The key margin story this

Speaker #2: market stability into stronger

Speaker #2: growth and continued share

Speaker #3: The key takeaway this quarter is that we maintained operating margin.

Speaker #2: gains. Turning now to margin performance,

Speaker #3: including a 5 basis point

Speaker #3: improvement, despite inflation-driven

Speaker #2: and drivers. The key margin

Speaker #2: story this quarter is that we maintained operating

Speaker #3: pressures. Strong sales

Speaker #2: margin, including a 5 basis

Speaker #3: growth, SG&A leverage,

Speaker #2: point improvement, despite

Speaker #3: and disciplined cost control more than

Speaker #2: As a result, although the mix shift can moderate gross margin percentage, it supports our broader objective of growing absolute profitability and expanding operating margins over time.

Speaker #3: offset net price cost

Speaker #2: inflation-driven pressures.

Speaker #3: headwinds. At the gross margin line, we

Speaker #2: Strong sales growth, SG&A

Speaker #2: leverage, and discipline cost control more

Speaker #3: can track that approximately 75 basis points

Speaker #2: than offset net price-cost

Speaker #3: Points, year over year, with price.

Speaker #2: headwinds. At the gross margin

Speaker #3: cost representing roughly 40 basis

Speaker #2: line, we contracted approximately 75

Speaker #3: points headwinds, on price cost,

Speaker #2: At the operating margin line, SG&A improved to 23.5% of sales, compared to 24.4 in the same quarter last year, reflecting disciplined cost control and operating leverage.

Speaker #2: basis points year over year, with

Speaker #3: we improved approximately 10 basis

Max Tunnicliff: At the operating margin line, SG&A improved to 23.5% of sales, compared to 24.4% in the same quarter last year, reflecting disciplined cost control and operating leverage. That leverage more than offset the gross margin headwinds and drove margin consistency year over year, even with continued investment in tech, analytics, and sales support. In addition to strong sales growth and cost management, return on invested capital increased 180 basis points on a trailing 12-month basis, reflecting strong sales growth, good cost control, and disciplined capital allocation. In total, our P&L performance shows that we can invest for growth while staying focused on profitability, even as our mix strategically shifts toward larger and more complex accounts. Turning to the cash flow and capital allocation slide. Operating cash flow was $266 million, representing approximately 70% of net income.

Speaker #2: price-cost representing roughly

Speaker #3: points from the first quarter. Our pricing

Speaker #2: 40 basis points headwind. On price

Max H. Tunnicliff: Our pricing actions helped offset ongoing impacts of tariffs and other inflation. We remain focused on pricing discipline and will continue managing for price/cost neutrality over time. Beyond price/cost, we also see smaller gross margin headwinds from customer mix, transportation costs, and customer delivery during the quarter. Customer mix impacts are important to emphasize. As we discussed previously, our customer mix continues to shift toward larger customers by design, as this is part of our strategy. While these customers typically carry lower gross margins, they generate predictable incremental profit dollars and maintain an accretive operating margin. The higher volumes associated with these relationships drive fixed cost leverage, improve asset utilization, and create operational efficiencies across our network. As a result, although the mix can moderately gross margin expansion, it's our broader objective to grow in absolute profitability and ending operating margin over time.

Speaker #3: actions helped offset the ongoing impacts

Speaker #2: cost, we improved approximately

Speaker #3: of tariffs and other

Speaker #3: inflation. We remained focused on

Speaker #2: 10 basis points from the first quarter.

Speaker #3: pricing discipline, and we will continue managing

Speaker #2: Our pricing actions helped offset the

Speaker #2: That leverage was more than off that leverage more than offset the gross margin headwinds, and drove margin consistency year over year. Even with continued investment in tech, analytics, and sales support.

Speaker #2: ongoing impacts of tariffs and other

Speaker #3: time. Beyond price cost, we

Speaker #2: inflation. We remained focused

Speaker #2: on pricing discipline and will continue.

Speaker #3: also experienced smaller gross

Speaker #2: managing toward price-cost neutrality over time. Beyond price

Speaker #3: margin headwinds from customer

Speaker #3: mix transportation costs and

Speaker #2: cost, we also experienced

Speaker #3: customer rebates during the quarter.

Speaker #2: In addition to strong sales growth and cost management, return on invested capital increased 180 basis points on a trailing 12-month basis. Reflecting strong sales growth, good cost control, and disciplined capital allocation.

Speaker #2: smaller gross margin headwinds from

Max Tunnicliff: In addition to strong sales growth and cost management, return on invested capital increased 180 basis points on a trailing 12-month basis, reflecting strong sales growth, good cost control, and disciplined capital allocation. In total, our P&L performance shows that we can invest for growth while staying focused on profitability, even as our mix strategically shifts toward larger and more complex accounts. Turning to the cash flow and capital allocation slide. Operating cash flow was $266 million, representing approximately 70% of net income.

Speaker #3: Customer mix impacts are

Speaker #2: customer mix transportation

Speaker #3: important to emphasize. As we've

Speaker #2: costs and customer rebates during the

Speaker #3: discussed previously, our customer we've discussed previously, our

Speaker #2: quarter. Customer mix impacts

Speaker #3: Mix continues to shift toward larger.

Speaker #3: customers by design. As this is part of customers by design.

Speaker #2: are important to emphasize. As

Speaker #3: our strategy, while these

Speaker #3: customers typically carry lower gross

Speaker #2: customer mix continues to shift toward larger

Speaker #2: In total, our P&L performance shows that we can invest for growth while staying focused on profitability, even as our mix strategically shifts toward larger and more complex accounts.

Speaker #3: margins, they generate attractive

Speaker #3: incremental profit dollars and

Speaker #2: As this is part of our strategy, while

Speaker #3: remain accretive to operating

Speaker #2: These customers typically carry lower gross.

Speaker #3: margin. The higher volumes associated with

Speaker #2: margins, they generate

Speaker #2: attractive incremental profit dollars

Speaker #3: these relationships drive fixed cost

Speaker #2: Turning to the cash flow and capital allocation slide, operating cash flow was 266 million, representing approximately 70% of net income. While the second quarter conversion rate was lower than last year, year-to-date cash generation remained strong, as inventory efficiency helped offset the working capital needs associated with growth.

Speaker #2: and remain attractive to operating

Speaker #3: leverage and improve asset

Speaker #3: utilization and create operating efficiencies

Speaker #2: margin. The higher volumes

Speaker #2: associated with these relationships drive

Speaker #3: across our network. As a

Speaker #3: result, although the mix shift can...

Speaker #2: fixed-cost leverage, improve asset

Speaker #3: moderate gross margin

Speaker #2: utilization, and create operating

Max Tunnicliff: While the Q2 conversion rate was lower than last year-to-date cash generation remains strong as inventory efficiency helped offset the working capital needs associated with growth. Our Q2 conversion rate was driven specifically by higher accounts receivable, primarily driven by our strong June sales improvement of 20% year-over-year. Additionally, we continued to run inventory more efficiently, finding ways to optimize inventory levels while keeping availability high for our customers. The increase in accounts payable outpaced inventory this quarter, largely a function of payment timing. Net capital spending this quarter was approximately $60 million, with investments focusing on strengthening our hub or distribution center and automation capacity, advancing our IT infrastructure, and investing in Fastenal Managed Inventory hardware capabilities. For full year 2026, we continue to expect net capital expenditures of approximately $320 million as we invest in hub capacity, FMI devices, automation, and technology.

Speaker #3: percentage, it supports our

Speaker #2: efficiencies across our network.

Speaker #2: As a result, although the mix shift can

Speaker #3: broader objective of growing absolute

Speaker #3: profitability and expanding operating margins over

Speaker #2: moderate gross margin

Speaker #2: percentage,

Speaker #3: time. At

Speaker #2: It supports our broader objective of growing.

Speaker #3: the operating margin line, SG&A improved

Max H. Tunnicliff: At the operating margin line, this continued to improve to 3.5% of net sales compared to 24.4% in the same quarter last year, reflecting disciplined cost control and operating leverage. That leverage more than offset net working capital gross margin headwinds and drove margin consistency year over year, even with continued investment in tech, analytics, and sales force. In addition to strong sales growth and cost management, return on capital increased 120 basis points on a trailing 12-month basis, reflecting strong sales growth, good cost control, and disciplined capital allocation. In total, our P&L performance was a result of investment growth while staying focused on profitability even as we make strategic shift towards larger end account customers. Turning to the cash flow and capital allocation slide. Operating cash flow was $26 million, representing approximately 70% of net income.

Speaker #2: Our second quarter conversion rate was driven specifically by higher accounts receivable. Primarily driven by our strong June sales improvement of 20% year over year.

Speaker #2: absolute profitability and expanding operating margins

Speaker #3: to 23.5% of sales,

Speaker #3: compared to 24.4 in the

Speaker #2: over

Speaker #2: time. At the operating margin line, SG&A

Speaker #3: same quarter last year,

Speaker #3: reflecting discipline cost control and

Speaker #2: improved to 23.5% of

Speaker #3: operating leverage. That leverage

Speaker #2: sales, compared to

Speaker #2: 24.4 in the same quarter last

Speaker #2: Additionally, we continued to run inventory more efficiently, finding ways to optimize inventory levels while keeping availability high for our customers. The increase in accounts payable outpaced inventory this quarter largely a function of payment timing.

Speaker #2: year. Reflecting discipline cost

Speaker #3: the gross margin headwinds and drove

Speaker #2: control and operating leverage.

Speaker #3: market consistency year over

Speaker #2: That leverage was more than offset that leverage more than offset the gross margin headwinds,

Speaker #3: year. Even with continued

Speaker #3: assessment impact, analytics, and

Max Tunnicliff: The increase in accounts payable outpaced inventory this quarter, largely a function of payment timing. Net capital spending this quarter was approximately $60 million, with investments focusing on strengthening our hub or distribution center and automation capacity, advancing our IT infrastructure, and investing in Fastenal Managed Inventory hardware capabilities. For full year 2026, we continue to expect net capital expenditures of approximately $320 million as we invest in hub capacity, FMI devices, automation, and technology.

Speaker #3: sales support. In addition to strong

Speaker #2: and drove market consistency

Speaker #2: year over year. Even with

Speaker #3: sales growth and cost

Speaker #3: management, return on invested capital increased

Speaker #2: continued assessment impact,

Speaker #2: analytics, and sales support. In

Speaker #3: 180 basis points on a trailing

Speaker #2: Net capital spending this quarter was approximately 60 million, with investments focusing on strengthening in our hub or distribution center and automation capacity. Advancing our IT infrastructure and investing in fast-tunnel managed inventory hardware capabilities.

Speaker #3: 12-month basis. Reflecting strong

Speaker #2: addition to strong sales growth and cost

Speaker #2: management, return on invested capital

Speaker #3: sales growth, good cost

Speaker #3: control, and discipline capital

Speaker #2: increased 180 basis points on a

Speaker #3: allocation. In total, our

Speaker #2: trailing 12-month basis. Reflecting

Speaker #3: P&L performance shows that we can invest for

Speaker #2: strong sales growth, good cost

Speaker #3: growth while staying focused on profitability,

Speaker #2: control, and discipline capital

Speaker #2: allocation.

Speaker #3: even as our mix strategically

Speaker #2: total, our P&L performance shows that we can invest

Speaker #2: For full year 26, we continue expect net capital expenditures of approximately 320 million, as we invest in hub capacity FMI devices, automation, and technology.

Speaker #3: shifts toward larger and more complex

Speaker #3: accounts. Turning to the

Speaker #2: for growth, while staying focused on

Speaker #2: profitability, even as our mix

Speaker #3: cash flow and capital allocation

Speaker #3: slide, operating cash flow was

Speaker #2: strategically shifts toward larger and more

Speaker #3: 266 million, representing

Speaker #2: complex

Speaker #2: accounts. Turning to the cash flow and capital allocation

Speaker #3: approximately 70% of net

Speaker #2: These investments are made to drive efficiency, scalability, and customer value. Based on current consensus revenue estimates for full year 26, our expected capex range represents approximately 3.5% of sales.

Speaker #3: income. While the second quarter conversion rate was lower income.

Max Tunnicliff: These investments are made to drive efficiency, scalability, and customer value. Based on current consensus revenue estimates for full year 2026, our expected CapEx range represents approximately 3.5% of sales, reflecting our continued focus on investing to grow the business. To put this into context, our average capital spend relative to sales over the past five years was approximately 2.5 percentage points, compared to roughly four in the preceding 10-year period, meaning that we go through periods of different investment run rates. 2026 is a year in which we will invest a little bit toward the higher end of that investment range. We returned $305 million to shareholders during the quarter, mostly through dividends alongside modest share repurchases. Together, these returns represented approximately 80% of net income, reflecting our confidence in cash generation and our commitment to returning value to shareholders. Our capital allocation approach remains unchanged.

Speaker #2: slide, operating cash flow was

Max H. Tunnicliff: While this quarter conversion was lower than last year-to-date cash generation remains strong as inventory efficiency helped offset the working capital needs associated with growth. Our Q2 conversion rate was driven specifically by higher accounts receivable, primarily driven by our strong June sales improvement of 20% year over year. Additionally, we continued to run inventory more efficiently, finding many ways to optimize inventory levels, keeping availability high to our customers. The increase in accounts payable outpaced inventory this quarter, largely a function of payment timing. Net capital investment was approximately $16 million, with investments focusing on strengthening our hub for distribution center and automation capacity, advancing our IT infrastructure, and investing in customer and inventory order availabilities. For full year in 2026, we continue to expect a net capital investment of approximately $180 million as we invest in hub capacity, FMI devices, automation, and technology.

Speaker #2: 266 million,

Speaker #3: than last year, year-to-date

Speaker #3: cash generation remained strong as

Speaker #2: representing approximately 70% of net

Speaker #3: inventory efficiency helped offset the

Speaker #2: While the second quarter conversion rate was lower than last year,

Speaker #3: working capital needs associated with

Speaker #3: growth. Our second quarter conversion rate

Speaker #2: year-to-date cash generation remained

Speaker #2: strong, as inventory efficiency helped

Speaker #3: was driven specifically by

Speaker #2: Reflecting our continued focus on investing to grow the business. To put this in the context, our average capital spend relative to sales over the past 5 years was approximately 2.5 percentage points, compared to roughly 4 in the preceding 10-year period, meaning that we go through periods of different investment run rates 26 is a year in which we will invest a little bit toward the higher end of that investment range.

Speaker #3: higher accounts receivable.

Speaker #2: offset the working capital needs associated

Speaker #2: with growth. Our second

Speaker #3: Primarily driven by our strong June sales.

Speaker #2: quarter conversion rate was driven specifically

Speaker #3: improvement of 20% year

Speaker #2: by higher accounts

Speaker #3: over year. Additionally,

Speaker #2: receivable, primarily driven by our strong June.

Speaker #3: we continued to run

Speaker #3: inventory more efficiently. Finding ways to

Speaker #2: sales improvement of

Speaker #2: 20% year over year.

Speaker #3: optimize inventory levels while keeping

Speaker #3: availability high for our

Speaker #2: Additionally, we continued to run

Speaker #3: customers. The increased accounts

Speaker #2: inventory more efficiently. Finding

Max Tunnicliff: 2026 is a year in which we will invest a little bit toward the higher end of that investment range. We returned $305 million to shareholders during the quarter, mostly through dividends alongside modest share repurchases. Together, these returns represented approximately 80% of net income, reflecting our confidence in cash generation and our commitment to returning value to shareholders. Our capital allocation approach remains unchanged.

Speaker #3: payable

Speaker #2: ways to optimize inventory levels while keeping

Speaker #3: Outpaced inventory this quarter was largely a function...

Speaker #2: availability high for our

Speaker #2: customers. The increased accounts

Speaker #3: of payment

Speaker #3: timing. Net capital spending this quarter was approximately

Speaker #2: We returned 305 million to shareholders during the quarter, mostly through dividends alongside modest share repurchases. Together, these returns represented approximately 80% of net income.

Speaker #2: payable

Speaker #2: outpaced inventory this quarter

Speaker #3: 60 million, with investments focusing

Speaker #2: largely a function of payment

Speaker #3: on strengthening our

Speaker #2: timing. Net capital spending this quarter was

Speaker #3: hub or distribution center and automation

Speaker #2: approximately 60 million, with

Speaker #3: capacity. Advancing our automation capacity.

Speaker #2: investments focusing on strengthening our

Speaker #3: IT infrastructure and

Speaker #2: Reflecting our confidence in cash generation and our commitment to returning value to shareholders. Our capital allocation approach remains unchanged, we prioritize investing in the business where we see strong returns.

Speaker #3: investing in FASTEL managed inventory

Speaker #2: hub or distribution center and

Speaker #3: hardware

Speaker #3: capabilities. For full year 26, we

Speaker #2: Advancing our IT infrastructure and

Speaker #2: investing in FASTEL managed

Speaker #3: continue to expect net capital expenditures of

Max Tunnicliff: We prioritize investing in the business where we see strong returns, returning excess cash to shareholders, and maintaining a conservatively capitalized balance sheet. I'll summarize as I close my section. The Q2 showed strong top-line execution, continued share gains, and disciplined cost management. Importantly, operating margin was consistent year-over-year as SG&A leverage and cost discipline offset gross margin pressures. That performance, together with ROIC expansion and strong capital allocation, demonstrates the durability of our business model. Thank you to everyone, and I'll turn it over to Dan.

Speaker #2: inventory hardware

Speaker #3: approximately 320 million, as we

Speaker #2: capabilities. For full year 26,

Speaker #3: invest in hub capacity FMI

Speaker #2: Returning excess cash to shareholders and maintaining a conservatively capitalized balance sheet. I'll summarize as I close my section. The second quarter showed strong top-line execution, continued share gains, and disciplined cost management.

Speaker #2: We continue to expect net capital.

Speaker #3: devices, automation, and

Speaker #3: technology. These investments

Speaker #2: expenditures of approximately 320

Speaker #2: million as we invest in hub

Max H. Tunnicliff: These investments will drive efficiency, scalability, and customer value. Based on current census revenue estimates for full year 2026, our expected CapEx range represents approximately 3.5% of net sales, reflecting our continued focus on investing to grow the business. To put this in context, our average capital spend relative to sales over the past 5 years was approximately 2.5% to 3 percentage points compared to roughly 4% in the preceding 10-year period, meaning there is a difference in investment rate. 2026 is a year where we will invest a little toward the higher end of that investment range. We returned $25 million to shareholders this quarter, mostly through dividends along with modest share repurchases. Together, these returns represented approximately 80% of net income, reflecting our commitment to cash distribution and our commitment to returning value to shareholders. Our capital allocation approach remains unchanged.

Speaker #3: are made to drive efficiency, scalability, and

Speaker #2: capacity, FMI devices,

Speaker #3: customer value. Based

Speaker #2: automation, and technology. These

Max Tunnicliff: The Q2 showed strong top-line execution, continued share gains, and disciplined cost management. Importantly, operating margin was consistent year-over-year as SG&A leverage and cost discipline offset gross margin pressures. That performance, together with ROIC expansion and strong capital allocation, demonstrates the durability of our business model. Thank you to everyone, and I'll turn it over to Dan.

Speaker #3: on current consensus revenue

Speaker #3: estimates for full year 26,

Speaker #2: Investments are made to drive efficiency.

Speaker #2: scalability, and customer

Speaker #3: our expected capex

Speaker #2: And importantly, operating margin was consistent year over year, as SG&A leverage and cost discipline offset gross margin pressures. That performance together with ROIC expansion and strong capital allocation demonstrates the durability of our business model.

Speaker #2: value. Based on current consensus,

Speaker #3: range represents approximately 3.5%

Speaker #2: revenue estimates for full year

Speaker #3: of sales. Reflecting our

Speaker #2: 26 are expected CapEx

Speaker #3: continued focus on investing to grow the

Speaker #2: range represents approximately

Speaker #3: business. To put this in

Speaker #3: context, our average capital spend

Speaker #2: 3.5% of sales.

Speaker #3: relative to sales over the past five years.

Speaker #2: Reflecting our continued focus on investing

Speaker #3: was approximately 2.5 percentage

Speaker #2: to grow the business. To put this in

Speaker #3: points. Compared to roughly

Speaker #2: context, our average capital

Speaker #2: Thank you to everyone, and I'll turn it over to Dan.

Speaker #2: spend relative to sales over the past five

Speaker #3: 4 in the preceding 10-year period,

Speaker #1: Thanks, Max. And good morning, everybody. My page is page 8 on the flipbook, so I'll touch on a few points as we look through that.

Speaker #3: meaning that we go through periods of different investment

Speaker #2: years was approximately

Dan Florness: Thanks, Max, and good morning, everybody. My page is page eight on the flip book, so I'll touch on a few points as those look through that. From a market outlook perspective, the broader market conditions continued to improve similar to the Q1. We've now had 6 months of 50-plus PMI. That, combined with some key leadership changes that we made back in 2023 and 2024, are really key to what you're seeing shine through. The inherent growth of Fastenal is shining through because of the market not giving us headwinds.

Speaker #2: 2.5% at key points, compared to

Speaker #3: run rates. 26 is a year in

Speaker #2: roughly 4 in the preceding 10-year

Speaker #3: which we will invest a little bit toward the

Speaker #2: period, meaning that we go through periods of

Speaker #3: higher end of that investment

Speaker #3: range. We returned

Speaker #2: different investment run rates. Twenty-six is

Speaker #1: From a market outlook perspective, the broader market conditions continued to improve similar to in the first quarter, we've now had 6 months of 50-plus PMI, that combined with some key leadership changes that we made back in 2023 and 2024, are really key to what you're seeing shine through.

Speaker #3: 305 million to shareholders during the

Speaker #2: a year in which we will invest a little bit

Speaker #3: quarter, mostly through dividends

Speaker #2: toward the higher end of that investment.

Speaker #3: alongside modest share rate

Speaker #2: range.

Speaker #3: purchases. Together, these returns

Speaker #2: We returned 305 million to

Speaker #2: shareholders during the quarter, mostly through

Speaker #3: represented approximately 80% of net

Speaker #2: dividends alongside modest share

Speaker #3: income. Reflecting our

Speaker #2: repurchases. Together, these

Speaker #3: confidence in cash generation and our

Speaker #3: commitment to returning value to

Speaker #2: returns represented approximately 80%

Speaker #3: shareholders. Our capital allocation

Speaker #2: of net income.

Speaker #2: Reflecting our confidence in cash generation

Speaker #3: approach remains unchanged. We prioritize

Max H. Tunnicliff: We prioritize investing within the business where we see strong returns, returning excess cash to shareholders, and maintaining a conservative capitalized balance sheet. I'll summarize this with the next section. The Q2 showed strong operational execution, continued cost discipline, and disciplined cost management. Importantly, operating margin was consistent year over year as special leverage and cost discipline offset echo margin pressures. That performance, together with ROIC expansion and strong capital allocation, demonstrate the durability of our business model. Thank you, everyone. I'll turn it over to Dan.

Speaker #2: and our commitment to returning value to

Speaker #3: Investing in the business, where we see strong

Speaker #2: shareholders. Our capital

Speaker #3: returns. Returning excess

Speaker #1: So the inherent growth of fast-tunnels shining through because of the market not giving us headwinds, but what you're really seeing is Jeff stepped into the chief sales officer role.

Speaker #3: cash to shareholders. And maintaining

Speaker #2: allocation approach remains unchanged. We

Speaker #2: prioritize investing in the business, where we see

Speaker #3: a conservatively capitalized balance

Speaker #3: sheet. I'll summarize as I

Speaker #2: strong returns. Returning

Dan Florness: What you're really seeing is Jeff stepped into the Chief Sales Officer role, I believe it was 2023, and I hope he doesn't shake his head and say, No, Dan, it was a different year. He made some changes in personnel at that time, and you're really seeing the outcome of those changes, and incredibly powerful as we've moved into 2026. There is an ongoing focus on price neutrality. It's no secret to anybody listening to this call that if I was being 100% candid, and you know that I'm always 100% candid, I would have felt a hell of a lot better about the quarter if our incremental margin would have been 24%. Coming into the quarter, we had a gross margin trend that was challenging. One of the things I told Jeff, when you have a trend that's your friend. You love that trend.

Speaker #2: excess cash to shareholders.

Speaker #3: close my section. The second quarter

Speaker #2: And maintaining a conservatively capitalized

Speaker #3: showed strong top-line execution,

Speaker #3: continued share gains, and disciplined

Speaker #2: balance sheet. I'll

Speaker #1: I believe it was 2023, and I hope he doesn't change take his head and say, "No, Dan, it's a different year." But he made some other he made some changes in personnel at that time, and you're really seeing the outcome of those changes and incredibly powerful as we've moved into 2026.

Speaker #2: To summarize, as I close my section, the...

Speaker #3: cost management. And

Speaker #3: Importantly, operating margin was consistent year over year.

Speaker #2: Second quarter showed strong capital and

Speaker #2: execution, continued share gains, and

Speaker #3: year, as SG&A leverage and

Speaker #2: disciplined cost and management. And

Speaker #3: Cost discipline offset the gross margin.

Speaker #2: importantly, operating margin was consistent

Speaker #3: pressures. That performance,

Speaker #3: together with ROIC

Speaker #2: year over year, as SG&A

Speaker #3: expansion and strong capital allocation,

Speaker #2: leverage and cost discipline offset the gross

Speaker #3: demonstrates the durability of our business

Speaker #2: margin pressures. That

Speaker #2: performance together with ROIC

Speaker #3: model. Thank you to everyone.

Speaker #1: There's an ongoing focus on price neutrality, and it's no secret to anybody listening to this call that if I was being 100% candid and you know that I'm always 100% candid, I would have felt a hell of that better about the quarter if our incremental margin would have been 24%.

Dan Florness: There is an ongoing focus on price neutrality. It's no secret to anybody listening to this call that if I was being 100% candid, and you know that I'm always 100% candid, I would have felt a hell of a lot better about the quarter if our incremental margin would have been 24%. Coming into the quarter, we had a gross margin trend that was challenging. One of the things I told Jeff, when you have a trend that's your friend. You love that trend.

Speaker #2: expansion and strong capital

Speaker #3: I'll turn it over to Daniel.

Speaker #2: allocation demonstrates the durability of our

Speaker #2: Thanks, Max, for the morning,

Dan L. Florness: Thanks, Max. Good morning, everybody. My page on the book is kind of point blank. We'll go through that. From a market outlook perspective, the broader market conditions continued to improve during the quarter. We've now had 6 months of plus PMI. That combined with some key leadership changes that we made back in 2023 and 2024 are really beginning to shine through. We inherently grow this fast-turning kind of features of the market, not even at will. What you're really seeing is Jeff stepped into this CEO role, I believe in 2023, and he has really changed the cadence of the company over the year. He made some other 3 key changes in personnel at that time, and you're really seeing the outcome of those changes and incredibly positive as we've moved into 2026.

Speaker #2: everybody. My page is

Speaker #2: business model. Thank you to

Speaker #2: page 8 on the book, so I'll

Speaker #2: everyone, and I'll turn it over to

Speaker #2: Daniel.

Speaker #2: touch on a few points.

Speaker #3: Thanks, Max. Good morning,

Speaker #3: everybody. My page

Speaker #2: We'll go through that. From a

Speaker #3: is page 8 on the

Speaker #2: market outlook perspective,

Speaker #3: book, so I'll touch on a few

Speaker #2: the broader market

Speaker #3: points. We'll go through that.

Speaker #2: conditions continued to improve similar

Speaker #1: Coming into the quarter, we had a gross margin trend that was challenging. And one of the things I told Jeff, the hardest when you have a trend that you're that's your friend.

Speaker #2: To the first quarter, we've now

Speaker #3: From a market outlook

Speaker #3: perspective, the broader market

Speaker #2: had six months of

Speaker #2: 50-plus

Speaker #3: conditions continued to

Speaker #2: PMI that, combined with

Speaker #3: improve similar to the first quarter, we've

Speaker #2: some key leadership changes that

Speaker #3: now had six months

Speaker #3: of 50-plus

Speaker #2: we made back in

Speaker #3: PMI, that combined

Speaker #1: You love that trend. You cherish that trend. You convince everybody to do the things necessary to keep that trend going, and you don't sit there and enjoy what's happening right now.

Speaker #2: 2023 and

Speaker #2: 2024, are really key to what

Dan Florness: You cherish that trend. You convince everybody to do the things necessary to keep that trend going, and you don't sit there and enjoy what's happening right now. You focus on where the hell you're going and making that trend better. If the trend gets disturbed by the economy, that's life. If the trend gets disturbed because you took your eye off the ball, that's us. Really focused on cherishing a good trend and changing a bad trend. Coming into the quarter, we had a bad trend with gross margin. That ultimately prevented us from being at that 24% incremental margin that I thought was achievable. With that said, the group changed the trend. Our gross margin sequentially improved despite the fact that there's more gross margin headwinds during the quarter than there was before.

Speaker #3: with some key leadership

Speaker #3: changes that we made back

Speaker #2: you're seeing shine through. So, the

Speaker #2: the inherent growth of Fastenal is shining through because of

Speaker #3: in 2023 and

Speaker #3: 2024, are really key

Speaker #2: the market not giving us

Speaker #2: headwinds. But what you're

Speaker #3: to what you're seeing shine through. So the

Speaker #3: inherent growth of FASTEL is

Speaker #2: really seeing

Speaker #1: You focus on where the hell you're going, and making that trend better. And if the trend gets disturbed by the economy, that's life. If the trend gets disturbed because you took your eye off the ball, that's us.

Speaker #2: Is Jeff stepped into the Chief Sales?

Speaker #3: shining through because of the market, not

Speaker #3: giving us headwinds. But

Speaker #2: officer role. I believe it was 2023, and I hope he

Speaker #2: doesn't change his head and say, "No, Daniel, it's a

Speaker #3: what you're really seeing

Speaker #3: is Jeff stepped into the

Speaker #2: different year."

Speaker #2: But he made some other—he made some...

Speaker #3: chief sales officer role. I believe it was 2023,

Speaker #2: changes in personnel at that time and

Speaker #3: and I hope he doesn't change his head and say,

Speaker #1: And so really focus on cherishing a good trend and changing a bad trend. Coming into the quarter, we had a bad trend with gross margin.

Speaker #3: No, Daniel, it's a different year.

Speaker #2: you're really

Speaker #2: seeing the outcome of those

Dan Florness: Really focused on cherishing a good trend and changing a bad trend. Coming into the quarter, we had a bad trend with gross margin. That ultimately prevented us from being at that 24% incremental margin that I thought was achievable. With that said, the group changed the trend. Our gross margin sequentially improved despite the fact that there's more gross margin headwinds during the quarter than there was before.

Speaker #3: But he made some other he made

Speaker #2: changes in incredibly powerful, as

Speaker #3: some changes in personnel at that.

Speaker #3: time and you're really

Speaker #2: we've moved into

Speaker #2: 2026. There's an ongoing

Speaker #3: seeing the outcome of

Speaker #1: That ultimately prevented us from being at that 24% incremental margin that I thought was achievable. With that said, the group changed the trend, and our gross margin sequentially improved despite the fact that there's more gross margin headwinds during the quarter than there was before.

Dan L. Florness: There's an ongoing price volatility, no shame in admitting on this call that if I was anything but 100% candid with you all today, 100% against it. I would have told you last quarter that we were going to have a margin that was a good 4%. Coming into the quarter, we had a gross margin trend that was challenged. One thing for Jeff. When you have a friend that you're a fucking friend, you love that friend, you cherish that friend, you convince everybody that you do the things necessary to keep that friend going. You don't sit there and enjoy what's happening right now. You focus on where the hell you're going and making that friend better. If the friend gets served by the economy, that's life. If the friend gets served a GI off the top.

Speaker #2: focus on pricing reality,

Speaker #3: those changes and incredibly

Speaker #3: powerful as we've moved into

Speaker #2: and

Speaker #3: 2026. There's an

Speaker #2: It's no secret they may listen to this.

Speaker #2: call that if I was being

Speaker #3: ongoing focus on pricing

Speaker #3: reality, and

Speaker #2: 100% candid and you know that I'm

Speaker #2: always 100%

Speaker #3: it's no secret they may listen to this

Speaker #2: candid, I would have felt a hell lot better about the

Speaker #3: call that if I was

Speaker #2: quarter according to my margin within

Speaker #3: Being 100% candid, and you know that,

Speaker #2: 24%. Coming into the quarter,

Speaker #3: I'm always 100%

Speaker #3: Candid, I would have felt a hell of a lot

Speaker #2: we had a gross margin

Speaker #2: trend that was

Speaker #3: better about the quarter according to my margin would have been

Speaker #3: 24%. Coming into

Speaker #2: challenging. And

Speaker #1: We just are fighting and clawing our way back. And that's how you saw the quarter play out. From a financial discipline perspective, we touched on ROIC and when I think about ROIC, 20 years ago, our ROIC was in the mid-20s.

Dan Florness: We just are fighting and clawing our way back, and that's how you saw the quarter play out. From a financial discipline perspective, we touched on ROIC, and when I think about ROIC, 20 years ago, our ROIC was in the mid-20s. Actually, if you go back far enough, and I'm going to take you back far enough for a second. When we went public in the late 1980s, our ROIC was in the low 30s. What changed as we went through the 1990s and into the 2000s is we were selling more than just fasteners. We needed to stock more product. We started importing directly. We had to stock a lot more product. Our ROIC went down into the mid-20s, and it was still there a decade ago.

Speaker #3: the quarter, we had a gross

Speaker #2: one of the things I told Jeff, the

Speaker #3: margin trend that

Speaker #2: hardest when you have a trend that

Speaker #2: you're that's your friend, you

Speaker #3: was

Speaker #3: challenging. And one of the things I told Jeff, the

Speaker #2: love that trend. You cherish that

Speaker #2: trend. You convince

Speaker #3: hardest when you have a trend that

Speaker #2: everybody to do the things

Speaker #3: you're that's your

Speaker #3: friend, you love that trend. You cherish

Speaker #2: necessary to keep that trend

Speaker #3: that trend. You

Speaker #2: and enjoy what's happening right

Speaker #3: convince everybody to do the

Speaker #1: Actually, if you go back far enough, and Dan, I'm going to take you back far enough for a second, when we went public in the late '80s, our ROIC was in the low 30s.

Speaker #3: things necessary to keep that

Speaker #2: Now, you focus on where the hell you're—

Dan Florness: Actually, if you go back far enough, and I'm going to take you back far enough for a second. When we went public in the late 1980s, our ROIC was in the low 30s. What changed as we went through the 1990s and into the 2000s is we were selling more than just fasteners. We needed to stock more product. We started importing directly. We had to stock a lot more product. Our ROIC went down into the mid-20s, and it was still there a decade ago.

Speaker #2: going. And making that

Speaker #3: trend going, and you don't sit there and enjoy what's

Speaker #2: trend better. And if the

Speaker #2: trend gets disturbed by the economy,

Speaker #3: happening right now. You focus on where the

Speaker #2: that's life. If the

Speaker #3: hell you're going. And

Speaker #1: What changed as we went through the '90s and into the 2000s is we were selling more than just fasteners. We needed to stack more product.

Speaker #2: Trend gets disturbed because you took your eye...

Speaker #3: making that trend better.

Speaker #3: And if the trend gets disturbed by the

Speaker #2: off the ball, that's

Speaker #2: off. And so really focus

Speaker #3: economy, that's life.

Dan L. Florness: Really focused on cherishing the good friend and changing up the bad friend. Coming into the quarter where we had a challenged gross margin, that's a discipline that we benefited from being at that 24% revenue mark that I thought was achievable. With that said, the group changed the trend, and our gross margin points sequentially improved despite the fact that there's more gross margin headwinds during the Q4 than there was before. We just are fighting wind on our back, and that easy call that will play out. From a financial discipline perspective, we've touched on ROIC, and when I think about our ROIC 20 years ago, our ROIC was in the mid-20s. Actually, if you think back far enough, and I'm going to back far enough for a second. When we went public in the late '80s, our ROIC was in the low 30s.

Speaker #2: on cherishing a good trend

Speaker #3: If the trend gets disturbed because you...

Speaker #3: took your eye off the ball, that's

Speaker #2: and changing a bad

Speaker #1: We started importing directly. We had to stack a lot more product. And our ROIC went down into the mid-20s. And it was still there a decade ago, and I'm really pleased to say over the last decade between some really strong discipline on the part of the team, Holden Lewis, our prior CFO, did a wonderful job of really showing us what we could do from an ROIC standpoint.

Speaker #2: trend. Coming in the quarter, we had a bad trend with

Speaker #3: off. And so really focus

Speaker #3: on cherishing a good

Speaker #2: gross margin. That

Speaker #3: trend and changing a bad

Speaker #2: ultimately prevented us from being at that

Speaker #3: trend. Coming in the quarter, we had a bad

Speaker #2: 24% incremental margin, as I thought.

Speaker #2: was achievable. With that

Speaker #3: trend with gross margin.

Dan Florness: I'm really pleased to say over the last decade, between some really strong discipline on the part of the team. Holden Lewis, our prior CFO, did a wonderful job of really showing us what we could do from an ROIC standpoint, but the group made it happen. Today, we're in the low 30s. Incredible financial discipline. There's one item that I don't know that everybody appreciates how good the performance is, but if you read our proxy, you'll quickly see how we get paid. What you read in the proxy about we get a piece of pre-tax growth, is true very deep into the organization. In Q2 of 2025, our operating earnings grew 40. I calculated these this morning, so if I'm wrong by a million or two, I apologize. It's how good my skills are with my phone calculator.

Speaker #2: said, the

Speaker #3: That ultimately prevented us from being

Speaker #2: group changed the

Speaker #3: at that 24% incremental

Speaker #2: trend. And our gross

Speaker #3: margin that I thought was achievable. With

Speaker #3: that said, the

Speaker #2: margins equation

Speaker #2: sequentially improved despite the

Speaker #3: group changed

Speaker #3: the trend.

Speaker #2: fact that there's

Speaker #2: more gross margin

Speaker #3: And our gross margin

Speaker #1: But the group made it happen. And today we're in the low 30s. So incredible financial discipline. There's one item that I don't know that everybody appreciates, how good the performance is.

Speaker #3: sequentially improved

Speaker #2: headwinds during the quarter than there

Speaker #2: was before. We just are

Speaker #3: despite the fact that there's

Speaker #3: more gross margin

Speaker #2: fighting the coin our way

Speaker #2: back. And that's how you saw the quarter play

Dan Florness: There's one item that I don't know that everybody appreciates how good the performance is, but if you read our proxy, you'll quickly see how we get paid. What you read in the proxy about we get a piece of pre-tax growth, is true very deep into the organization. In Q2 of 2025, our operating earnings grew 40. I calculated these this morning, so if I'm wrong by a million or two, I apologize. It's how good my skills are with my phone calculator.

Speaker #3: headwinds during the

Speaker #3: quarter than there was before. We

Speaker #2: out. From a financial

Speaker #2: discipline perspective, we

Speaker #3: just are fighting the coin our way

Speaker #1: But if I if you read our proxy, you'll quickly see how we get paid. And what you read in the proxy about we get a piece of pretext growth.

Speaker #3: back. And that's how you saw the

Speaker #2: touched on ROIC

Speaker #3: quarter play out. From a

Speaker #2: And when I think about ROIC,

Speaker #3: financial discipline

Speaker #3: perspective, we touched on ROIC

Speaker #2: 20 years ago, ROIC was in the

Speaker #2: mid-20s.

Speaker #3: and when I think about

Speaker #2: Actually, if you go back far enough—and I'm

Speaker #1: Is true very deep into the organization. So in the second quarter of 2025, our operating earnings grew and I calculated these this morning, so if I'm wrong, if I have a million or two, I apologize.

Speaker #3: ROIC, 20 years ago, our

Speaker #2: Going to take you back far enough for a second, when...

Speaker #3: ROIC was in the

Speaker #2: We went public in the late '80s, our

Speaker #3: mid-20s. Actually, if you go back far

Speaker #2: ROIC was in the low

Speaker #3: enough, and I'm going to take you back far enough for a

Speaker #2: 30s. What changed

Speaker #3: Second, when we went public in the late—

Speaker #2: as we went into the '90s and into the

Dan L. Florness: What changed us through the '90s into the 2000s is we were becoming more than fasteners. We needed to be the Fastenal product. We started supporting directly into the economic loss product, and our ROIC went down into the mid-20s, and it was still there a decade ago. Really, these sales over the last decade between really strong discipline on the team, a little bit prior to fall of 2021, really focused, we could do ROIC standpoint. The group made it happen, and today we're in the low 30s. Incredible financial discipline. There's one item that I don't think that everybody appreciates how good the performance is. If you read our proxy, you'll quickly see how we get paid. What you'll see in the proxy about we get a big check also is proven very deeply in our organization.

Speaker #2: 2000s is we were selling more

Speaker #3: '80s, our ROIC was in

Speaker #3: the low 30s.

Speaker #2: than just FASTEL. We

Speaker #3: What changed as we went into the '90s and into

Speaker #2: needed to sell more

Speaker #2: product. We started

Speaker #3: the 2000s is we

Speaker #1: It's how good my skills are with my phone calculator. But I think we grew 49.2 million dollars in operating income. In the second quarter of 2026, we grew 65.7.

Speaker #2: importing directly. We had to stock

Speaker #3: were selling more than just

Speaker #3: FASTEL. We needed to sell more

Speaker #2: a lot more product. And our

Speaker #3: product. We

Dan Florness: I think we grew $49.2 million in operating income. In Q2 of 2026, we grew $65.7 million. That's a 33% increase in our pre-tax dollar growth. Forget percentages for a second, just the dollar growth. In Q1 of this year, our operating earnings grew $45.3 million. In Q2, again, we grew $65.7 million. That's a 45% increase in the dollar growth. We all get a piece of that action. You know what? There's a lot of folks in Fastenal that had a nice Q2 bonus. They had what they felt was a pretty darn good Q1 bonus, and we just crushed that number because the bonuses in Q2, if I did my math right, are probably about 45% higher than they were in Q1.

Speaker #2: ROIC went down into the

Speaker #2: mid-20s. And it was still there a decade ago. And—

Speaker #3: started importing directly.

Speaker #3: We had to stock a lot more product.

Speaker #2: I'm really pleased to say over the last

Speaker #2: decade

Speaker #3: And our ROIC went down into

Speaker #3: the mid-20s. And it was still there a

Speaker #2: between some really strong

Speaker #2: discipline on the part of the

Speaker #3: decade ago, and I'm really pleased to say over

Speaker #2: team, Holden Lewis, our prior

Speaker #1: That's a 33% increase in our pretext dollar growth. Forget percentages for a second, just the dollar growth. In the first quarter of this year, our operating earnings grew 45.3 million dollars.

Speaker #3: the last

Speaker #3: decade between some really

Speaker #2: CFO, did a wonderful job of really showing

Speaker #3: strong discipline on the part of the

Speaker #2: us what we could do for ROIC

Speaker #3: team, Holden Lewis, our

Speaker #2: standpoint. But the group made it

Speaker #2: happen. And today we're in the low

Speaker #3: Prior CFO did a wonderful job of

Speaker #2: 30s. Incredible financial

Speaker #3: really showing us what we could do from our

Speaker #3: ROIC standpoint. But the group made it

Speaker #2: discipline. There's one item

Speaker #2: that I don't know that everybody

Speaker #3: happen. And today, we're in the

Speaker #2: appreciates, how good the performance

Speaker #3: low 30s. Incredible

Speaker #1: In the second quarter, again, we grew 65.7. That's a 45% increase. In the dollar growth. We all get a piece of that action. You know what?

Speaker #2: is. But if I if you

Speaker #3: financial discipline. There's one

Dan Florness: That's a 45% increase in the dollar growth. We all get a piece of that action. You know what? There's a lot of folks in Fastenal that had a nice Q2 bonus. They had what they felt was a pretty darn good Q1 bonus, and we just crushed that number because the bonuses in Q2, if I did my math right, are probably about 45% higher than they were in Q1.

Speaker #3: item that I don't know that everybody

Speaker #2: read our proxy, you'll quickly

Speaker #3: appreciates, how good the

Speaker #2: see how

Speaker #3: performance is. But if

Speaker #2: we get paid. And what you read in

Speaker #3: I if you read our proxy,

Speaker #2: the proxy about we

Speaker #1: There's a lot of folks in fastenel that had a nice second quarter bonus. They had what they thought was a pretty darn good first quarter bonus, and we just crushed that number because the bonuses in the second quarter I did my math, right?

Speaker #2: get a piece of pretext

Speaker #3: you'll quickly

Speaker #3: see how we get paid. And what

Speaker #2: Growth is true, very deep into the

Speaker #3: You read in the proxy about...

Speaker #2: organization. So in

Speaker #2: the second

Speaker #3: we get a piece of pretext

Dan L. Florness: In the Q2 of 2025, our operating earnings improved 40. Again, I probably did this morning. I'm a little raw. I haven't had my coffee. I apologize. I'm going to make my deals are what my phone says later. I think we grew to $92 million in revenue. In the Q2 of 2026, we grew to $65 and $27. That's a 33% increase in our big tax dollar. I can give the percentage in a second. Dollar growth. In the Q1 of this year, our operating earnings grew $45.3 million. In the Q2, again, we grew to $57. That's a 45% increase in the dollar growth We all get to that actually. You know what? A lot of people passed that test and had a nice Q4 bonus.

Speaker #3: growth. Is true very

Speaker #2: quarter of 2025, our

Speaker #3: deep into the organization.

Speaker #3: So in the

Speaker #1: Are probably about 45% higher than they were in the first quarter. When I look at all that and I look at our SG&A and how we managed SG&A, the number that just impresses the heck out of me is our headcount growth.

Speaker #2: operating earnings grew

Speaker #3: second quarter of

Speaker #2: And I calculated these this morning, so if—

Dan Florness: I look at all that, and I look at our SG&A and how we managed SG&A, the number that just impresses the heck out of me is our headcount growth and how we're managing. It's because we're not squeezing it to death. We're investing for where we're going, just like we always have. We're just getting progressively better, and some of that is the team is better today than they were 2 and 5 and 10 years ago. Some of that is some of the AI tools. We're implementing large account business faster today than we would've 1, 2, and 3 years ago because we can do quotes faster. We're just really good. I'm really impressed with the SG&A leverage because I know how much bonuses grew Q1 to Q2 and Q2 to Q2. That's really hard to get that kind of leverage on SG&A.

Speaker #3: 2025, our operating earnings

Speaker #2: I'm wrong, I have a minute or two.

Speaker #2: apologize. How good

Speaker #3: grew and I calculated these

Speaker #2: my skills are with my

Speaker #3: this morning, so if I'm wrong, I have a minute or two.

Speaker #2: phone calculator. But I

Speaker #3: I apologize. So

Speaker #2: think we grew 49.2 million

Speaker #1: And how we're managing and it's because we're not squeezing it to death. We're investing for where we're going. Just like we always have. We're just getting progressively better.

Speaker #2: dollars in operating income. In

Speaker #3: how good my skills

Speaker #3: are with my phone calculator.

Speaker #3: But I think we grew 49.2

Speaker #2: the second quarter of

Speaker #2: 2026, we grew

Speaker #3: million dollars in operating

Dan Florness: We're just getting progressively better, and some of that is the team is better today than they were 2 and 5 and 10 years ago. Some of that is some of the AI tools. We're implementing large account business faster today than we would've 1, 2, and 3 years ago because we can do quotes faster. We're just really good. I'm really impressed with the SG&A leverage because I know how much bonuses grew Q1 to Q2 and Q2 to Q2. That's really hard to get that kind of leverage on SG&A.

Speaker #2: 65.7.

Speaker #3: income. In the second quarter of

Speaker #1: And some of that is the team is better today than they were 2 and 5 and 10 years ago. Some of that is some of the AI tools.

Speaker #2: That's a 33%

Speaker #3: 2026, we grew

Speaker #2: increase in our

Speaker #2: pretext dollar growth. Forget percentages for

Speaker #3: 65.7.

Speaker #1: We're implementing large account business faster today than we would have 1, 2, and 3 years ago. Because we can do quotes faster. We're just really good.

Speaker #3: That's a

Speaker #2: a second. It's a dollar

Speaker #3: 33% increase in our

Speaker #2: year, our operating earnings

Speaker #3: pretext dollar growth. Forget

Speaker #2: grew

Speaker #3: percentages for a second. It's a dollar

Speaker #2: 45.3 million

Speaker #3: growth. In the first quarter of this year, our operating

Speaker #1: And so I'm really impressed with the SG&A leverage because I know how much bonuses grew. Q1 to Q2 and Q2 to Q2. That's really hard to get that kind of leverage on SG&A.

Speaker #2: dollars. In the second quarter, again, we

Speaker #3: earnings grew

Speaker #2: grew 65.7. That's

Speaker #3: 45.3 million

Speaker #2: a 45%

Speaker #2: increase. In the dollar increase.

Speaker #3: dollars. In the second

Speaker #2: growth. We all get a piece of that,

Speaker #3: quarter, again, we grew 65.7.

Speaker #2: actually. You know what? There's a lot of

Speaker #3: That's a 45%

Speaker #1: My kudos to the group. Strong cash generation, our capital allocation continues to be very focused. On growth, technology, and a thoughtful look at shareholder returns as measured in ROIC.

Speaker #2: folks in Fastenal that had a nice

Dan Florness: My kudos to the group. Strong cash generation. Our capital allocation continues to be very focused on growth, technology, and a thoughtful look at shareholder returns as measured in ROIC. To that end, I want to thank Max. Earlier in the year, I said to Max, "Our stock price is approaching $50 a share. We've been maintaining a 2% yield for quite some time. It'd really be nice to do a dollar a share in dividend." He started out a little bit less than that because he wanted to dedicate some dollars to buying back some shares and consistently do that to cover things like dilution. I took another swing at the pitch here a few weeks ago. I said, "Raising it to $0.26 would get us to a dollar for the year.

Speaker #3: In the dollar growth. We all get a piece

Speaker #2: second quarter

Speaker #2: bonus. They had what they thought was a pretty darn good

Speaker #3: of that, actually. You know what?

Dan L. Florness: They had their bonuses they got in their Q1 bonus, we trust that number because the bonus in the Q2 that didn't happen, I probably want to try to hire more in the Q4. When I look at all that and I look at our SG&A and how we manage SG&A, the number that impressed the heck out of me is our head count growth and how we're managing it, if we're not using it as CapEx. We're investing for where we're going, just like we always have. We're just getting progressively better. Some of that is the team is better today than they were 2, 5, and 10 years ago. Some of that is the AI tools. We're implementing large company practices today that we only would have 1, 2, 3 years ago because we can support growth faster. We're just really good.

Speaker #2: first quarter bonus, and we just crushed that

Speaker #3: There's a lot of folks in Fastenal that

Speaker #2: number because the bonus is in the second

Speaker #3: had a nice second quarter

Speaker #3: bonus. They had what they thought was a pretty

Speaker #2: quarter. I did

Speaker #3: darn good first quarter bonus, and we just

Speaker #2: my math right, or probably about 45% higher

Speaker #2: than they were in the first

Speaker #3: crushed that number because the bonus

Speaker #1: To that end, I want to thank Max. Earlier in the year, I said to Max, our stock price is approaching $50 a share. We've been maintaining a 2% yield for quite some time.

Speaker #2: quarter. When I look at all that and I look at our

Speaker #3: is in the second

Speaker #3: quarter. I did my math right? Or probably about

Speaker #2: SP&A and how we manage

Speaker #3: 45% higher than they were in the first

Speaker #2: SP&A, the number

Speaker #3: quarter. When I look at all that and I look

Speaker #2: that impresses the heck out of

Speaker #2: me is our headcount

Speaker #3: at our SP&A, and how we

Speaker #2: growth. And how we're managing

Speaker #3: manage

Speaker #1: It'd really be nice to do a penny a dollar a share in dividend. He started out a little bit less than that because he wanted to dedicate some dollars to buying back some shares.

Speaker #3: SP&A, the number that impresses the most is the...

Dan Florness: It'd really be nice to do a dollar a share in dividend." He started out a little bit less than that because he wanted to dedicate some dollars to buying back some shares and consistently do that to cover things like dilution. I took another swing at the pitch here a few weeks ago. I said, "Raising it to $0.26 would get us to a dollar for the year.

Speaker #2: And we're not easing at the desk.

Speaker #3: heck out of me is our

Speaker #2: We're investing for where we're going, just like we—

Speaker #3: headcount growth. And how we're

Speaker #2: always have. We're

Speaker #3: managing and that's because we're not easing at the

Speaker #2: just getting progressively better.

Speaker #3: desk. We're investing for where we're

Speaker #2: And some of that is the team is progressively better and some of that is

Speaker #1: And consistently do that to cover things like dilution. I took another swing at the pitch in the here in a few weeks ago, and I said, raising it to 26, but get it to a dollar for the year.

Speaker #3: going. Just like we always

Speaker #2: better today than they were two.

Speaker #3: have. We're just getting

Speaker #2: and five and ten years ago. Some of

Speaker #2: that is some of the AI tools.

Speaker #3: the team is better today than they

Speaker #2: We're implementing large-scale business

Speaker #3: were two and five and ten years

Speaker #2: FASTEL today than we would have one, two, and

Speaker #3: ago. Some of that is some of the AI.

Speaker #2: three years ago. Because we can do both

Speaker #1: You wouldn't mind considering that. I appreciate it. Maybe 2 times was the charm, but the thought process there is simply this. A dollar dividend for the year will allow us whatever the street does, it allows us to have a decent return a dividend yield.

Speaker #2: faster. We're just really

Speaker #3: tools. We're implementing

Dan Florness: If you wouldn't mind considering that, I'd appreciate it." Maybe two times is the charm, the thought process there is simply this. A dollar dividend for the year will allow us, whatever the Street does, it allows us to have a decent return, a dividend yield. That's the thinking behind that. Don't read anything more into it than that. When you think about the dollar this year, think about where that perhaps goes in the future. That's a different group that'll be making that decision. From an organizational priorities, from a capital allocation, we talked about it. Continued investment in tools, technology, and analytics to support and scale growth. A lot of companies are talking about AI. We don't talk a lot about it.

Speaker #3: large-scale business FASTEL today than we would have

Speaker #2: good. And so I'm really

Dan L. Florness: I'm really impressed with the SG&A leverage. I know how much this group, Q1 to Q2 and Q2 to Q2. That's really hard to do kind of leverage on SG&A. My kudos to the group. Strong cash generation, stock allocation, remaining very focused on growth, technology, and thoughtful look to shareholder returns with our ROIC. For that, I want to thank Max. Earlier in the year I said, "Max, no, our stock price approaches $100 a share." We've been maintaining a 10% yield quite some time. It would be nice to do it near that $100 a share in dividend. We started out a little less than that because we have dedicated dollars to buy back shares and consistently do that public facing solution.

Speaker #2: impressed with the SP&A

Speaker #3: one, two, and three years ago. Because we can do

Speaker #3: both faster. We're

Speaker #2: leverage. I know how much bonuses

Speaker #3: just really good. And so I'm

Speaker #2: grew. Q1 to

Speaker #3: really impressed with the

Speaker #2: Q2 and Q2 to Q2.

Speaker #2: That's really hard to get that kind of...

Speaker #3: SP&A leverage. I know how

Speaker #2: leverage on

Speaker #3: much bonuses grew.

Speaker #2: SP&A. My kudos to the

Speaker #3: Q1 to Q2, and Q2 to...

Speaker #2: group. Strong cap

Speaker #3: Q2. That's really hard to get that kind

Speaker #2: generation, capital allocation continues to be

Speaker #3: of leverage on

Speaker #3: SP&A. My kudos to the

Speaker #1: So that's the thinking behind that. Don't read anything more into it than that. And when you think about the dollar this year, think about where that perhaps goes in the future.

Speaker #2: very focused. On

Dan Florness: That's the thinking behind that. Don't read anything more into it than that. When you think about the dollar this year, think about where that perhaps goes in the future. That's a different group that'll be making that decision. From an organizational priorities, from a capital allocation, we talked about it. Continued investment in tools, technology, and analytics to support and scale growth. A lot of companies are talking about AI. We don't talk a lot about it.

Speaker #3: group. Strong caps

Speaker #2: growth,

Speaker #2: technology, and thoughtful look

Speaker #3: generation, capital allocation

Speaker #3: continues to be very focused.

Speaker #2: at shareholder returns, that's interested in.

Speaker #2: ROIC. To that

Speaker #3: On growth,

Speaker #2: end, I want to thank Max.

Speaker #1: But that's a different group that we're making that decision. From an organizational priorities, from a capital allocation, we talked about it, but continued investment in tools, technology, and analytics to support and scale growth.

Speaker #3: technology, and

Speaker #2: I earlier in the year, I said,

Speaker #3: thoughtful look at shareholder returns that's interested in

Speaker #2: "Max, our stock price is

Speaker #3: ROIC. To

Speaker #2: approaching $50 a

Speaker #3: that end, I want to thank

Speaker #2: share." We've been maintaining a 2%

Speaker #3: Max. I earlier in the year, I said,

Speaker #2: yield for quite some time. It'd really be nice to do a

Speaker #3: "Max, our stock

Speaker #3: price is approaching $50 a

Speaker #2: penny or a dollar a share

Speaker #3: share." We've been maintaining a

Speaker #1: And a lot of companies are talking about AI. We don't talk a lot about it. We just do a bunch of things behind the scenes.

Speaker #2: in dividend. We started out

Speaker #3: 2% yield for quite some time. It'd really be

Speaker #2: a little bit less than that because he wanted to.

Speaker #2: dedicate some dollars

Speaker #3: Nice to do a penny, a dollar, a—

Speaker #2: to buying back some shares.

Dan Florness: We just do a bunch of things behind the scenes to have better tools to support our people and ultimately our customers in how we deliver a business. We're being very thoughtful from a financial, fiscal discipline in what we're spending in AI relative to what kind of return is it generating for us, and what kind of productivity is it giving us? Because if you add up all of our labor costs, and Max is going to give me a dirty look for sharing this number. If you add up all of our labor costs in Q2, base, bonus, social taxes, health insurance, our school of business. You add all that up, we spent about $400 million. We spend about $1.6 billion a year in people cost.

Speaker #3: share in

Speaker #3: dividend. We started out a little bit less than that because he wanted

Speaker #1: To have better tools to support our people. And ultimately, our customers and how we deliver our business. But we're being very thoughtful from a financial, fiscal discipline.

Speaker #2: And consistently do that to cover things.

Speaker #3: to dedicate some dollars

Speaker #2: like dilution.

Speaker #3: to buying back some

Speaker #2: I took another thing at the

Dan L. Florness: I know it's blank at pitch in the year and few weeks ago when I said no, raising it at least back to that $1 a share. He wouldn't mind hearing that. I think he'd appreciate it. Maybe times are charmed. The thought process is to do that. The dollar dividend for the year will allow whatever the Street does, it allows us to have a decent return given to you. That thinking behind it, don't read anything more into that. I mean, think about the dollar dividend. Think about where that perhaps goes in the future. That's a different group really making that decision. From an ROIC priority, capital allocation, we talked about what a team does and tools, technology, and analytics to support and scale growth. A lot of people are going to be talking about AI. We don't talk a lot about it.

Speaker #3: shares. And consistently do that

Speaker #2: pitch in the year in a few

Speaker #2: weeks ago, and I said, "You know, raising it to

Speaker #3: to cover things like

Speaker #3: dilution. I took another

Speaker #1: And what we're spending in AI relative to what kind of return is it generating for us? And what kind of productivity is it giving us?

Speaker #2: 26, we'll get us to a dollar for the year." He

Speaker #3: thing at the pitch in the year

Speaker #2: wouldn't mind considering that. I appreciate

Speaker #2: it. Maybe three

Speaker #3: A few weeks ago, I said,

Speaker #3: "Raising it to 26, we'll get us to a dollar for the

Speaker #2: times his charm,

Speaker #2: but the thought process there is

Speaker #1: Because we spent about 400 if you add up all of our labor costs in Max is going to give me a dirty look for sharing this number.

Speaker #3: year." He wouldn't mind considering that. I appreciate

Speaker #2: simply this. A

Speaker #3: it.

Speaker #2: dollar dividend for the

Speaker #3: Maybe two times his charm,

Speaker #3: but the thought

Speaker #2: year will

Speaker #1: But if you add up all of our labor costs in the second quarter, base, bonus, social taxes, health insurance, our school of business, you add all that up, we spent about $400 million.

Dan Florness: If you add up all of our labor costs in Q2, base, bonus, social taxes, health insurance, our school of business. You add all that up, we spent about $400 million. We spend about $1.6 billion a year in people cost.

Speaker #3: process there is simply this. A

Speaker #2: allow us, whatever the street

Speaker #3: dollar dividend for the

Speaker #2: does, it allows us to have a

Speaker #2: decent return given

Speaker #3: year

Speaker #3: will allow us,

Speaker #3: Whatever the street does, it allows us to

Speaker #2: you. So that's the thinking behind that. Don't

Speaker #1: So we spent about $1.6 billion a year, and people cost. And the question, will ultimately need to ask ourselves is, how much are you willing to spend for that group to be 5%, 10% more productive?

Speaker #3: have a decent return

Speaker #2: read anything more into it than

Speaker #2: that. And when you think about the dollar this year,

Dan Florness: The question we'll ultimately need to ask ourself is, how much are you willing to spend for that group to be 5%, 10% more productive? That's how we'll gauge what we do or don't do in the future. At least I believe that's how the group will do it. From a strategic progress standpoint, I'm not going to list out all the things other than to say, wow, I think the team is executing at an incredible level, and I'm really proud of the group. Finally, it's not on the bullet list, but I'll add, I think you've come to know that I probably tell stories that are too long.

Speaker #3: given you. So that's the thinking

Speaker #2: think about where that

Speaker #3: behind that. Don't read anything more

Speaker #2: perhaps goes in the future. But

Speaker #3: into it than that. And when you think about the

Speaker #2: That's a different group, really making that future.

Speaker #2: decision—from an organizational priority, from

Speaker #3: Dollar this year, think about where...

Speaker #3: that perhaps goes in the

Speaker #1: And that's how we'll gauge what we do or don't do in the future. At least I believe that's how the group will do it.

Speaker #2: a capital allocation, we talked about it, but

Speaker #3: But that's a different group really making that decision. From an organizational

Speaker #2: continued investment in tools, technology,

Speaker #3: Priority, from a capital allocation—we talked about...

Speaker #2: and analytics to

Speaker #1: From a strategic progress standpoint, I'm not going to list out all the things other than to say, wow, I think the team is executing at an incredible level and I'm really proud of the group.

Speaker #2: support and scale growth.

Speaker #3: it, but continued investment in

Speaker #2: And a lot of

Speaker #3: tools, technology, and analytics

Speaker #2: companies are talking about AI. We don't talk a lot

Speaker #2: about it. We just do a bunch of things don't talk a lot about it.

Speaker #3: to support and scale

Speaker #3: growth.

Speaker #2: behind the scenes. To have better

Dan L. Florness: We just do a bunch of things behind the scenes to have better tools to support our people and ultimately our customers and how we deliver to our business. We're being very thoughtful from a plan and a skill set for discipline and what's the best thing in the AI world to kind of return the agenda for it and what kind of productivity is it giving us? Because if you add up all of our labor costs and back, I'm going to give you a very low sharing number. If you add up all our labor costs this Q2, base, bonus, post taxes, health insurance, our pool of business, you add all that up, it's about $400 million. We spend about $1.6 billion a year in people costs.

Speaker #3: And a lot of companies are talking about AI. We

Speaker #1: Finally, and it's not on the bullet list, but I'll add I think you've come to know that I probably tell stories that are too long.

Speaker #2: tools to support our people and

Speaker #2: ultimately our customers and how we

Speaker #3: We just do a bunch of things behind the scenes. To

Speaker #2: deliver our business. But we're being

Speaker #2: very thoughtful from a

Speaker #3: have better tools to support our

Speaker #1: And but I'm also pretty transparent. In how we share the business. And I thought I'd share some internal messaging head for the group this morning.

Speaker #3: people and ultimately our customers and

Speaker #2: financial fiscal discipline.

Dan Florness: I'm also pretty transparent in how we share the business, and I thought I'd share some internal messaging I had for the group this morning, both in our video that goes to 25,000 employees, as well as our conversation with our regionals and folks I've been talking to. When I think about the pieces, we always talk about year-to-date sales versus goal. What Q2 2026 and June sales details tell me. One thing that really stands out when I look at the June set of percentages is everything, whether it's geographic or it's end market or it's customer use, everything is double-digit. We haven't been in that situation for quite some time. The only thing on that page that isn't double-digit is our non-contract customer sales growth for that group. That isn't our priority of going to market.

Speaker #3: how we deliver our business. But we're

Speaker #2: And what we're spending in AI

Speaker #3: being very thoughtful from

Speaker #2: relative to what kind of return is it

Speaker #2: generating for us? And what kind of

Speaker #3: a financial fiscal

Speaker #3: discipline. And what we're spending

Speaker #1: Both in our video that goes 25,000 employees, as well as our conversation with our regionals. And folks have been talking to, and when I think about the pieces, we always talk about year-to-date sales versus goal.

Speaker #2: productivity is it giving us?

Speaker #2: Because we spent about $400, if you add up...

Speaker #3: in AI relative to what kind of

Speaker #2: all our labor costs

Speaker #3: return is it generating for us? And what

Speaker #2: Max, you're going to give me a dirty look for sharing this.

Speaker #3: What kind of productivity is it giving?

Speaker #3: us? Because we spent about 400 if

Speaker #2: number. But if you add up all of our labor

Speaker #2: costs in the second quarter,

Speaker #3: You add up all our labor.

Speaker #2: face, bonus, social

Speaker #3: Costs in max, you're going to give me a dirty...

Speaker #2: taxes, health

Speaker #1: What quarter 2, 2026, and June sales details tell me? One thing that really stands out when I look at the June set of percentages is everything, whether it's geographic, or it's end market, or it's customer use, everything is double-digit.

Dan Florness: What Q2 2026 and June sales details tell me. One thing that really stands out when I look at the June set of percentages is everything, whether it's geographic or it's end market or it's customer use, everything is double-digit. We haven't been in that situation for quite some time. The only thing on that page that isn't double-digit is our non-contract customer sales growth for that group. That isn't our priority of going to market.

Speaker #3: look sharing this number. But if you add up all of

Speaker #2: insurance, our school of business, you add all that.

Speaker #3: Our labor costs in the second...

Speaker #3: quarter, space, bonus, social

Speaker #2: up, we spent about 400 million dollars.

Speaker #3: taxes, health

Speaker #2: So we spent about 1.6 billion a

Speaker #3: insurance, our school of business,

Speaker #2: year, and people cost. And the question,

Speaker #2: will ultimately need to ask ourselves

Speaker #3: you add all that up, we spent about 400

Dan L. Florness: The question we will ultimately be asked is how much extra are you willing to spend for that group to be 5%, 10%, more productive? That's how we'll gauge what we do or don't do in the future. We believe it will help the group greatly. From a strategic roadmap standpoint, I would put all those things under the way of I think the team is executing at an incredible level, and I'm really proud of the group. Finally, I don't want to belittle it, and I think coming to know that I probably story's too long. I'm also transparent in how we steer the business, and I shared with you from my meeting with the group this morning both on our video that goes to 5,000 employees, both our conversation with our region presidents this morning.

Speaker #2: is, how much are you willing to spend?

Speaker #3: million dollars. So we spent about $1.6 million.

Speaker #3: billion a year, and people cost. And the

Speaker #2: for that group to be 5%,

Speaker #2: 10% more

Speaker #3: question, will ultimately need to ask

Speaker #2: productive? And that's how

Speaker #3: ourselves is, how much are you willing to

Speaker #1: We haven't been in that situation for quite some time. And the only thing on that page that isn't double-digit is our non-contract customers, sales girls of that group.

Speaker #2: we'll engage what we do or don't do in the

Speaker #3: spend for that group to be

Speaker #3: 5%, 10% more

Speaker #2: future. At least I believe that's how the groups

Speaker #3: productive? And

Speaker #2: do it. From a

Speaker #2: From a strategic progress standpoint, I'm not going to list out all the

Speaker #3: that's how we'll engage what we do or

Speaker #2: things other than to say, "Wow, I think the

Speaker #3: don't do in the future. At least, I believe that's

Speaker #2: team is executing at an

Speaker #3: how the groups do it. From

Speaker #1: And that isn't our priority of going to market. However, we love that customer group too, and we want to grow that customer group. And I'm pleased to say that the growth in that group is double what it was 12 months ago.

Speaker #2: incredible level. And I'm really proud of the

Speaker #3: a strategic progress standpoint, I'm not going to

Speaker #2: group. Finally, and

Speaker #3: list out all the things other than to say, "Wow, I

Speaker #2: it's not all on the bullet list, but I'll

Speaker #3: think the team is executing

Dan Florness: However, we love that customer group too, and we want to grow that customer group. I'm pleased to say that the growth in that group is double what it was 12 months ago, because we're building a better mousetrap. We're building a better machine to serve the market. A better machine to serve the market grows, whether you're putting people energy behind it or not to drive it. You're seeing that come into fruition. The other things talked about on it, and I'm a milestone person, and I always highlight milestones. In Q2, we have four districts now that are averaging more than $8 million a month. That's four districts that are either north of $100 million a year, or they're on the verge of being there. They're close. That was zero a decade ago. Heck, that was zero five years ago.

Speaker #2: add I think we've come to know

Speaker #3: at an incredible level. And I'm really proud

Speaker #2: that I probably tell stories for too

Speaker #3: of the group.

Speaker #2: long. And but

Speaker #3: Finally, and it's not on the bullet list,

Speaker #2: I'm also pretty transparent in

Speaker #3: But I'll add, I think we've—

Speaker #1: Because we're building a better mousetrap. We're building a better machine to serve the market. A better machine to serve the market grows whether you're putting people, energy behind it or not to drive it.

Speaker #2: how we share the business. And I thought

Speaker #3: come to know that I probably tell stories for

Speaker #3: too long.

Speaker #2: I'd like to share some internal messaging I had for the—

Speaker #3: And but I'm also pretty

Speaker #2: group this morning. Both in

Speaker #3: transparent in how we share the business.

Speaker #2: our video that goes 25,000

Speaker #2: employees as well as our conversation with our

Speaker #3: And I thought I'd share some internal messaging I

Speaker #2: regionals. And folks have been talking to,

Speaker #3: had for the group this

Speaker #3: Morning. Both in our video that goes

Speaker #2: and when I think

Speaker #1: And you're seeing that come into fruition. The other things talked about on it, and this is I'm a milestone person. And I always highlight milestones.

Speaker #3: 25,000 employees as well as our conversation

Speaker #2: about the pieces, we always

Dan Florness: You're seeing that come into fruition. The other things talked about on it, and I'm a milestone person, and I always highlight milestones. In Q2, we have four districts now that are averaging more than $8 million a month. That's four districts that are either north of $100 million a year, or they're on the verge of being there. They're close. That was zero a decade ago. Heck, that was zero five years ago.

Dan L. Florness: When I think about pieces of we like to get our year's sales goal, what Q2 2026 June sales tells me. One thing that really stands out when I look at June set of percentages is everything, whether it's geographic or it's end market or it's customer unit, every is double digits. We have been in that situation for quite some time. The only thing on that page that isn't double digits are our non-contract sales to that group. That isn't our priority to go into the market. However, we love that customer group too, and we want to grow that group. I'm pleased to say that the growth of that group is double what it was 12 months ago because we're building a better machine to serve the market.

Speaker #2: talk about year-to-date sales versus

Speaker #3: with our regionals. And folks have been talking to,

Speaker #2: goal. What

Speaker #3: and

Speaker #3: when I think about the

Speaker #2: quarter two 2026 and June

Speaker #3: pieces. We always talk about year-to-date sales versus

Speaker #2: sales details tell

Speaker #2: me. One thing that really stands

Speaker #3: goal.

Speaker #1: And in the second quarter, we have four districts now. That are averaging more than $8 million a month. That's four districts that are either north of $100 million a year, or they're on the or they're on the verge of being there.

Speaker #2: out when I look at the

Speaker #3: What quarter two 2026 and

Speaker #2: June set of

Speaker #3: June sales details

Speaker #3: tell me. One thing that

Speaker #2: percentages is

Speaker #2: everything, whether it's

Speaker #3: really stands out when I look at the

Speaker #2: geographic, or it's end

Speaker #3: June set

Speaker #3: of percentages

Speaker #3: is everything, whether it's

Speaker #2: everything is double-digit.

Speaker #3: geographic, or it's

Speaker #2: We have been in that situation

Speaker #2: for quite some time, and the only

Speaker #1: They're close. That was zero a decade ago. Heck, that was zero five years ago. There's 59 district managers. So 25% of our district managers in the second quarter were doing more than $4 million a month.

Speaker #3: end market, or it's customer use, everything is

Speaker #2: thing on that page that isn't

Speaker #3: double-digit. We have been in that situation

Speaker #2: double-digit is our

Speaker #3: for quite some

Speaker #2: non-contract

Dan Florness: There's 59 district managers. 25% of our district managers in Q2 were doing more than $4 million a month. That's a $50 million a year business. For folks that have owned Fastenal a long time, you remember $100 million Fastenal or a $50 million Fastenal. We have 25% of our districts are that big now, and that's an incredibly talented group of people. With the end of the day, it was really nice for the group for my final month as CEO to grow north of 20%. Bill, to the sales team, thank you for that. If you take that $844 million, because we're over $833 million, our run rate on a 30-day basis is a $10 billion company. Nice touch. With that, I'm going to stop talking at you and see what questions you have. Thank you.

Speaker #3: time. And the only thing on that page that

Speaker #2: customer sales growth for that group.

Speaker #2: And that isn't our

Speaker #3: isn't double-digit is

Speaker #3: our

Speaker #2: priority of outgoing the market.

Speaker #3: non-contract customer sales growth for that

Speaker #2: However, we love that customer group too, and we

Speaker #1: That's a $50 million a year business. For folks that have owned FAST on a long time, you remember $100 million FAST or a $50 million FAST.

Speaker #3: group. And that

Speaker #2: want to grow that customer group. And I'm pleased to say

Speaker #3: isn't our priority of outgoing the

Speaker #2: that the growth in that group.

Speaker #3: market. However, we love that customer

Speaker #2: is double what it was 12 months

Speaker #3: group too, and we want to grow that customer group. And I'm

Speaker #2: ago. Because we're

Speaker #2: building a better mousetrap. We're building a

Speaker #3: I'm pleased to say that the growth in that

Speaker #1: We have 25% of our districts are that big now. And that's an incredibly talented group of people. And with the added day, it was really nice to the group for my final month as CEO to grow north of 20%.

Speaker #3: group is double what it

Speaker #2: better machine to serve the

Speaker #3: was 12 months ago.

Speaker #2: market. A

Speaker #2: better machine to serve the

Speaker #3: Because we're building a better mousetrap.

Dan L. Florness: A better machine to serve the market grows whether you're putting people and energy behind it or not to drive it, and you're seeing that in the solution. The other thing we talked about on that, and listen, I'm a milestone person, and I always like milestones. We have a sector where we have 4 districts now that are averaging more than $80 million a month. That's 4 districts that are either north of $180 million a year

Speaker #2: market grows whether

Speaker #3: We're building a better machine to serve the

Dan Florness: With the end of the day, it was really nice for the group for my final month as CEO to grow north of 20%. Bill, to the sales team, thank you for that. If you take that $844 million, because we're over $833 million, our run rate on a 30-day basis is a $10 billion company. Nice touch. With that, I'm going to stop talking at you and see what questions you have. Thank you.

Speaker #2: you're putting people energy behind it or

Speaker #3: market. A

Speaker #3: better machine

Speaker #2: not to drive it. And you're seeing

Speaker #3: to serve the market

Speaker #2: that come into

Speaker #2: fruition.

Speaker #1: So to the sales team, thank you for that. And if you we're over $833, our run rate on a 30-day basis is a $10 billion company.

Speaker #3: grows whether you're putting people energy

Speaker #2: The other things we talked about on it,

Speaker #3: behind it or not to drive it.

Speaker #2: and this is I'm a

Speaker #3: And you're seeing that come into

Speaker #3: fruition.

Speaker #2: milestone person. And I've

Speaker #3: The other things we talked about on

Speaker #2: always highlighted

Speaker #2: milestones. In the second quarter, we

Speaker #3: it, and this is

Speaker #1: Nice touch. With that, I'm going to stop talking at you. And do you have questions yet? Thank you.

Speaker #3: I'm a milestone person.

Speaker #2: have four districts

Speaker #2: now. That are averaging more than 8

Speaker #3: And I've always highlighted

Speaker #3: milestones. In the second

Speaker #2: million a month. That's more than 8 million a month.

Speaker #3: quarter, we have four

Speaker #2: four districts that are either

Speaker #2: Thank you. And I'll be conducting a question-and-answer session if you'd like to be placed in the question queue. Please press star 1 and your telephone keypad.

Operator: Thank you. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad. As a reminder, we ask you please ask one question and one follow-up. Once again, that's star one to be placed in the question queue, and a confirmation tone will indicate your line is in the question queue. Our first question today is coming from David Manthey from Baird. Your line is now live.

Speaker #3: districts now. That are averaging

Speaker #2: north of 100 million a

Speaker #2: year or

Speaker #2: they're on the verge of being

Dan L. Florness: On the verge of being a cult. That was 0 years ago. That was 0 to 5 years ago. There's 59 district managers. 25% of our district managers in the Q2 were doing more than $4 million. That's a $100 million business. For folks that have owned Fastenal a long time, you remember a $100 million Fastenal or a $50 million Fastenal. We have 25% of our district making that today now. That's an incredibly talented group of people. Yesterday was a nice group to, for my month as CEO, to grow north of 40%, so to do those same things like that. Take that $844 million, because we're over $833 million, our run rate on a 30-day basis is a $10 billion company. Nice. With that, I'm going to stop talking and hang out here and take a quick question. Yeah. Thank you.

Speaker #3: That's four districts that are

Speaker #3: either north of $100 million a

Speaker #2: close. That was zero

Speaker #2: And as a reminder, we ask you please ask one question in one follow-up. Once again, that's star 1 to be placed in the question queue.

Speaker #3: year or

Speaker #2: a decade ago. In fact, that was zero five years

Speaker #3: they're on the verge of

Speaker #2: ago. There's 59 district

Speaker #3: being close. That

Speaker #2: And a confirmation tone will indicate your line is in the question queue. Our first question today is coming from David Matthew from Baird. Your line is now live.

Speaker #2: managers. So 25% of our

Speaker #3: was zero a decade ago. In fact, that was

Speaker #2: district managers in the second quarter.

Speaker #3: zero five years ago. There's

Speaker #2: were doing more than 4 million a

Speaker #3: 59 district managers. So 25%

Speaker #2: month. That's a $50 million year.

Speaker #3: of our district managers in the

Speaker #2: business.

Speaker #3: Thank you. Good morning, everyone.

David Manthey: Thank you. Good morning, everyone.

Speaker #3: Second quarter, we're doing more than $4 million.

Speaker #4: Good morning.

Dan Florness: Good morning.

Speaker #3: a month. That's a $50 million

Speaker #2: time, you remember 100 million

Speaker #3: Dan, what do you say? It was an absolutely stellar run. Congratulations and thanks for everything. We always appreciate it.

Speaker #2: dollar FASTNAL or a 50 million dollar

David Manthey: Dan, what do you say? It was an absolutely stellar run. Congratulations, and thanks for everything. We also appreciate it.

Speaker #3: dollar year business. For folks that have owned

Speaker #2: FASTNAL. We have 25% of our

Speaker #2: districts are that big now.

Speaker #3: FASTNAL a long time, you remember

Speaker #3: 100 million dollar FASTNAL or a 50 million

Speaker #2: And that's an incredibly talented group of

Speaker #4: Thank you.

Dan Florness: Thank you.

Speaker #3: dollar FASTNAL. We have

Speaker #2: people.

Speaker #3: So I guess that means that Jeff and Max get the tough questions here. Sales growth, obviously terrific at 15%. And the team has recently been signaling kind of 25% plus incrementals at this level of growth.

Speaker #3: 25% of our districts are that big

Speaker #2: And with the end of the day, it was really

David Manthey: I guess that means that Jeff and Max get the tough questions here. Sales growth, obviously terrific at 15%, and the team has recently been signaling kind of 25% plus incrementals at this level of growth. I know that Dan went through a couple of the items that affected that, but I'm wondering if you can crystallize that for us and talk about the puts and takes that sort of drove that contribution margin this quarter. More importantly, as you're looking out to the H2, which of those do you think persist and which of those may alleviate as we get to the H2 and lead to stronger contribution margins?

Speaker #3: now. And that's an incredibly

Speaker #2: nice to group on the for

Speaker #3: talented group of

Speaker #2: my final month as CEO

Speaker #3: people. And with the end of the day,

Speaker #2: to grow north of 20%. So

Speaker #2: to the sales team, thank you for that.

Speaker #3: it was really nice with the group on

Speaker #3: for my final month as

Speaker #2: And if you take that 844

Speaker #3: CEO to grow north of 20%.

Speaker #2: million, because we're over

Speaker #2: 833, our run rate on

Speaker #3: So to the sales team, thank you for

Speaker #3: that. And if you take that

Speaker #3: And I know that Dan went through a couple of the items that affected that. But I'm wondering if you can crystallize that for us and talk about the puts and takes that sort of drove that contribution margin this quarter.

Speaker #2: A 30-day basis is a $10 billion.

Speaker #3: 844 million, because we're over

Speaker #2: company. Nice

Speaker #2: touch. With that, I'm going to stop

Speaker #3: 833, our run

Speaker #2: talking at you and

Speaker #3: Rate on a 30-day basis is a 10.

Speaker #2: see what questions you have. Thank

Speaker #3: billion dollar company. Nice

Speaker #2: you.

Speaker #3: touch. With that, I'm

Speaker #1: Thank you. Now that you Thank you. I think you got the question and answer session. got the question and answer session, if you'd like to be If you'd like to be placed in the question queue, placed in the question queue, please please press star one and a press star one and a telephone telephone keypad.

Speaker #3: going to stop talking at you.

Operator: Thanks. I'll be opening up the next session. I see this here. Can we please place questions in the Q? Please place all relevant info in the keypad. As we wander, we ask that you send questions in one at a time. Once you have submitted your one-time placed question, you want a confirmation, you can mute your lines and place questions in the Q. Our first person today is from Jeff McJunkin. Jeff, you're now live. Thank you. Morning everyone.

Speaker #3: And more importantly, as you're looking out to the second half, which of those do you think persist? And which of those may alleviate as we get to the back half of the year and lead to stronger contribution margins?

Speaker #3: And do you have a question for me? Thank

Speaker #3: you.

Speaker #1: And as a reminder, keypad. And as a reminder, we ask we ask you please ask one question you please ask one question and one and one follow-up.

Speaker #4: Sure, Dave. This is Max. I'll take that one. To start. So if we think back to the first quarter of this year, where we were disappointed in our net price-cost position of 50 basis points, it's important to keep that component into context with the rest of my comments.

Max Tunnicliff: Sure, Dave. This is Max. I'll take that one to start. If we think back to the Q1 of this year where we were disappointed in our net price cost position of 50 basis points, it's important to keep that component into context with the rest of my comments. The reason I say that is because as we moved forward, as we said in our prepared remarks and as Dan reiterated, we did eat into that 50 by 10 basis points. We're focused there at the same time growing at significantly fast levels. Balancing and optimizing both of those we feel was a success mark on the Q1 for us.

Speaker #1: Once again, follow-up. Once again, that's star that's star one to be placed in the one to be placed in the question queue. And a question queue.

Speaker #1: And a confirmation phone will indicate confirmation phone will indicate your line is in the your line is in the question question queue. Our first queue.

Speaker #1: live?

Speaker #3: Thank you. Good

Speaker #3: morning, everyone.

Speaker #1: Our first question today is here from question today is here from David Matthew from David Matthew from Bergerlin. Is that Bergerlin. Is that live?

Speaker #4: Good

Speaker #4: morning.

Dan L. Florness: Morning.

Speaker #3: Dan, what do you say? It was an

Jeff McJunkin: Dan, what do you say? It was an absolutely stellar run. Greg, Leslie, thanks everybody. We all appreciate it.

Speaker #3: absolutely stellar run. Congratulations

Speaker #2: Thank

Speaker #2: you. Good morning, everyone.

Speaker #3: Good

Speaker #3: And thanks for everything. We also appreciate it.

Speaker #3: morning.

Speaker #2: Dan, what do you say? It—

Speaker #4: Thank

Speaker #4: you.

Speaker #4: And the reason I say that is because as we move forward, as we said in our prepared. Marks and as Dan reiterated, we did eat into that 50 by 10 basis points.

Speaker #2: was an absolutely stellar run.

Dan L. Florness: Thank you.

Speaker #3: So I guess that

Speaker #2: Congratulations and thanks for everything. We also

Speaker #3: means that Jeff and Matt took the tough So I guess that means that Jeff and Matt

Operator: I guess that means that Jeff's going to ask the tough questions here. Sales growth, obviously career rich at 15%. The team has recently been doing kind of 25 and plus for more than a little just level of growth. I know Dan would have probably been hyper-focused on that. I'm wondering if you can crystallize or talk about what sort of take that sort of overall had contra-cyclical this quarter. More importantly, as we look out the H2, which of those things persist and which of those may abate as we get back year into strong margin expansion?

Speaker #3: questions here.

Speaker #2: appreciate it.

Speaker #3: Thank it.

Speaker #3: you.

Speaker #3: Sales growth, obviously

Speaker #3: terrific at

Speaker #3: 15%. And the

Speaker #2: did the tough questions

Speaker #4: And so we're focused there. At the same time, growing at significantly fast levels. So balancing and optimizing both of those, we feel was a success mark on the quarter for us.

Speaker #2: here. Sales growth,

Speaker #3: team has recently been

Speaker #2: obviously, terrific at

Speaker #3: signaling kind of 25% plus

Speaker #2: 15%.

Speaker #3: incremental. This level of

Speaker #2: And the team has recently

Speaker #3: growth. And I know that Dan went through a couple of

Speaker #3: the items that affected that.

Speaker #2: been signaling kind of

Speaker #2: 25% plus incremental. This level

Speaker #3: But I'm wondering if you can

Speaker #3: crystallize it for us and talk about the puts

Speaker #4: With that being said, it doesn't mean that we dismiss the 50 and now negative 40 basis points. But that negative 40 basis points that we still sit with today, if you think about that from an incremental perspective, is going to be 3 or 4 percentage points on the incremental.

Speaker #2: of growth. And I know that Dan went through a

Max Tunnicliff: With that being said, it doesn't mean that we dismiss the 50 basis points and now negative 40 basis points, that negative 40 basis points that we still sit with today, if you think about that from an incremental perspective, is going to be 3 or 4 percentage points on the incremental. You get to the mid-20s.

Speaker #2: couple of the items that affected

Speaker #3: and takes that sort of drove.

Speaker #3: that. Contribution onto

Speaker #2: that. But I'm wondering if you—

Speaker #2: can crystallize it for us and talk

Speaker #3: this quarter. And more importantly, as you're

Speaker #2: about the puts and takes that sort of

Speaker #3: looking out to the second half, which

Speaker #2: drove that.

Speaker #3: of those do you think

Speaker #3: persists and which of those

Speaker #2: Contribution onto this quarter. And more

Speaker #2: importantly, as you're looking out to the second

Speaker #3: may alleviate as we get to

Speaker #2: half, which of those do you think

Speaker #3: the back end of the year, lead to

Speaker #4: So you get to the mid-20s, when that net negative goes away. Number one. And then number two, we did, as Dan iterated, paid some bonuses on that growth.

Speaker #3: stronger contribution

Speaker #2: persists? And which of

Speaker #2: those may alleviate

Max Tunnicliff: When that net negative goes away, number one. Number two, we did, as Dan iterated, paid some bonuses on that growth, and that is a contributing factor now. The way you think about those is if we continue to grow like we want to, we're always going to have some bonus paid. That one you could dismiss out of the incremental walk. That gross margin, our position is to maintain price cost neutrality. The second part of your question was, when do you get there? At this moment, we're going to keep chipping away, fighting as fast as we can, but the trajectory is not something that we're expecting to be completely closed in the H2.

Speaker #4: Sure, Dave. This is Max. I'll take

Max H. Tunnicliff: Sure, Dave. This is Max. I'll have that one. If we think back to the Q1 of this year, where we were submitting our net price off position at 50 basis points. It's an important exact component in context with the rest of the comment. The reason I say that is because as we move forward, as we said in our prepared remarks, Dan reiterated, we did achieve that 50 basis points. We're focused there. At the same time, growing at significantly fast levels. Balancing and optimizing both of those we feel was a success for our team on the quarter for us. Would that be said, does it mean that we dismiss the 50 and now negative 40 basis points?

Speaker #2: as we get to the back end of the year

Speaker #4: that one. To

Speaker #4: start, so if we think

Speaker #2: to stronger contribution

Speaker #2: margins?

Speaker #4: back to the first

Speaker #3: Sure, Dave. This is margins?

Speaker #3: Max, I'll take that one.

Speaker #4: quarter of this year, where

Speaker #4: we were disappointed in where we were disappointed

Speaker #3: start, so if

Speaker #4: And that also has that is a contributing factor. Now, those are the way you think about those is if we continue to grow like we want to in we're always going to have some bonus paid.

Speaker #4: our net price cost

Speaker #3: we think back to

Speaker #3: the first quarter of this year,

Speaker #4: position of 50 basis

Speaker #4: points, it's important to

Speaker #4: keep that component in the context with the

Speaker #3: in our net price

Speaker #3: cost position of 50 basis

Speaker #4: rest of my comments. And the reason I say that is

Speaker #4: So that one you could dismiss out of the incremental walk. But that gross margin, our position is to maintain price-cost neutrality. And so the second part of your question was, when do you get there?

Speaker #3: points,

Speaker #4: because as we move

Speaker #4: forward, as we said in our prepared remarks,

Speaker #3: It's important to keep that component in the...

Speaker #3: context with the rest of my comments. And the reason

Speaker #4: remarks, as Dan

Max Tunnicliff: That gross margin, our position is to maintain price cost neutrality. The second part of your question was, when do you get there? At this moment, we're going to keep chipping away, fighting as fast as we can, but the trajectory is not something that we're expecting to be completely closed in the H2.

Speaker #4: reiterated, we did eat into that

Speaker #3: I say that is because, as we move forward,

Speaker #3: forward, as we said in

Speaker #4: 50 by 10

Speaker #3: our prepared remarks, as Dan

Speaker #4: basis points. And so we're focused there

Speaker #3: reiterated, we did eat into

Speaker #4: at the same time

Speaker #4: growing at

Speaker #4: At this moment, we're going to keep chipping away, fighting as fast as we can. But the trajectory is it's not something that we're expecting to be completely closed in the second half.

Speaker #3: that

Speaker #3: 50 by 10 basis points. And so we're

Speaker #4: significantly fast levels.

Speaker #4: So balancing and optimizing both of

Speaker #3: focused there at the same time.

Speaker #4: those, we feel was a

Speaker #3: growing at

Speaker #3: significantly fast

Speaker #4: Success mark on the quarter for us.

Speaker #3: levels. So balancing and optimizing

Speaker #4: With that being said, it doesn't mean that we...

Speaker #4: dismissed the 50 and

Speaker #3: both of those, we feel

Speaker #4: We're going to continue to look at a lot of things we're doing from a growth perspective. And we're going to continue to chip away at that net negative price-cost position.

Speaker #3: was a success mark on the quarter for

Speaker #4: now negative 40 basis points.

Max Tunnicliff: We're going to continue to look at a lot of things we're doing from a growth perspective, we're going to continue to chip away at that net negative price cost position. As we move through the year and chip that away, our incrementals will naturally improve back to where. Like we say, if we're growing this fast, we should be mid-single digits. We are not backing off of that statement, I guess we'd say. I don't want to say commitment, maybe that's a little too strong, but that we believe this business is set to drive the mid-20s when we're growing this fast. We'll get back to that over time.

Speaker #4: But that negative 40 basis points that we

Speaker #3: us. With that being said, it doesn't mean that—

Max H. Tunnicliff: That negative 40 basis points when you associate with that, if you think about the incremental effect that gives, is going to be 3% or 4% of incremental on the income level. You get to the mid-20s when that net negative goes away, number one. Number two, we did, as Dan iterated, paid some bonuses on that growth, and that also has an impact. I know. The way we think about those is if we continue to grow as we want and we're all going to have our bonus paid. That means that you could dismiss that out of the incremental walk. That gross margin, our position is to maintain price neutrality. The second part of your question was when do you get there? At this moment, we're going to keep chipping away at lighting as fast as we can.

Speaker #4: still sit with today, points that we still sit with

Speaker #3: we dismissed the

Speaker #3: 50 and now negative 40 basis

Speaker #4: If you think about that from an incremental

Speaker #3: points. But that negative 40 basis

Speaker #4: perspective, is going to be

Speaker #4: And as we move through the year and chip that away, our incrementals will naturally improve. Back to where like we say, if we're growing this fast, we should be mid-single digits.

Speaker #4: three or four percentage points on the

Speaker #3: today if you think about that from an

Speaker #4: incremental. So we get to the

Speaker #3: incremental perspective, is going

Speaker #4: mid-20s, when

Speaker #4: that net negative goes

Speaker #3: to be three or four percentage

Speaker #4: away. Number one. And then

Speaker #3: points on the incremental.

Speaker #4: We are not backing off of that. That statement, I guess you would say. I don't want to say commitment. Maybe that's a little too strong.

Speaker #3: we get to the mid-20s,

Speaker #4: number two, we did,

Speaker #3: when that net negative goes

Speaker #4: as Dan

Speaker #4: iterated, paid some

Speaker #3: away. Number one. And

Speaker #4: bonuses on that growth. And

Speaker #3: then number two, we

Speaker #4: But that we believe this business is set to drive the mid-20s when we're growing this fast. And so we'll get back to that over time.

Speaker #3: did, as Dan

Speaker #4: that also has that is a contributing

Speaker #3: iterated, paid

Speaker #4: factor now. Those are the

Speaker #4: The way you think about those is, if we

Speaker #3: some bonuses on that

Speaker #3: growth. And that also has that is

Speaker #4: continue to grow if we want to.

Speaker #4: and we're always going to have some bonus paid.

Speaker #3: a contributing factor now. Those

Speaker #3: Are the way you think about those...

Speaker #3: Got it. Thank you. And then, Jeff, I dislike the question. What will you do differently? Because I don't think that that's really applicable here at FAST anyway.

Speaker #4: So that one you could bonus pay.

David Manthey: Got it. Thank you. Jeff, I dislike the question, what will you do differently? Because I don't think that that's really applicable here at Fastenal anyway. When I think about the past couple of CEO eras, the Overton era of store growth and the Florness era, I don't know, FMI and national accounts, et cetera. When you think about the range of tools that Fastenal has today, what are the strategic growth engines that you plan on leaning on to start the Jeff Watts era?

Speaker #3: is if we continue to grow if we want

Speaker #4: dismiss out of the incremental walk. But that

Speaker #3: to and we're always going to have some

Speaker #4: gross margin, our

Speaker #4: position is to

Speaker #3: So that one you could dismiss out of the incremental

Speaker #4: maintain price cost

Speaker #4: neutrality. And so the second part of your

Speaker #3: walk. But that gross margin,

Speaker #3: But when I think about the past couple of CEO eras, I mean, the Overton era of store growth and the Flores era, I don't know, FMI and national accounts, etc.

Speaker #3: our position is

Speaker #4: question was, when do you get there?

Speaker #3: to maintain price cost

Speaker #4: At this moment, we're going to

Speaker #4: keep chipping away, fighting, as

Speaker #3: neutrality. And so the

Speaker #3: The second part of your question was, when do you get...

Speaker #4: fast as we can. But the

Speaker #4: trajectory is, it's not

Speaker #3: there? At this moment, we're going

Max H. Tunnicliff: The trajectory is, it's not something that we're expecting to be completely closed in the H2. We're going to continue to look at a lot as we're doing from a growth perspective, and we're going to continue to chip away at that negative price position. As we move through year and chip that away, our incremental nav will improve. Back where, like we say, if we're growing this fast, you'd think that they're not backing off of that. That statement, I guess, I don't want to commit anything negative too strong, but that we believe this business to drive the mid-20s when we're done with Fastenal Co. We'll get to that over time.

Speaker #3: When you think about the range of tools that FAST has today, what are the strategic growth engines that you plan on leaning on to start the Jeff Watts era?

Speaker #3: to keep chipping away,

Speaker #4: something that we're expecting

Speaker #3: Fighting, as fast as we can.

Speaker #4: to be completely closed in the

Speaker #4: second half. We're

Speaker #3: But the trajectory

Speaker #3: is it's not something that

Speaker #4: going to continue to look

Speaker #4: at a lot of things we're doing from a growth

Speaker #3: we're expecting to be completely

Speaker #3: closed in the second

Speaker #4: perspective, and we're going to continue.

Speaker #4: That's a good question. First, I'd say that this isn't a transition we're sticking with the strategy. And the strategy that we've dealt with the last two years, the three strategic pillars, they're going to be unchanged, increasing sales effectiveness, enhancing our service expanding markets.

Speaker #3: half. We're going to continue to look

Max Tunnicliff: That's a good question. First, I'd say that this isn't a transition. We're sticking with the strategy, the strategy that we've dealt with for the last two years. The three strategic pillars, they're going to be unchanged, increasing sales effectiveness, enhancing our service, expanding markets. I think what changes is every day it seems like the AI portion and the tools that we're developing are helping us increase speed. I think one thing that's important is you saw it in June. June kind of shocked us a little bit in our revenue as far as our sequentials go. Really digging in, there was some one-off orders that we were able to get that we wouldn't normally have gotten, just from new business signing some one-off type orders.

Speaker #4: to chip away at that net

Speaker #3: at a lot of things we're doing from

Speaker #4: And as that net negative price cost

Speaker #4: we move through the year and chip

Speaker #3: a growth perspective. And we're

Speaker #3: going to continue to chip away at it.

Speaker #4: that away, our incrementals will

Speaker #4: naturally improve. Back to

Speaker #3: position. And as we move through the

Speaker #4: where like we say, if we're

Speaker #3: year and chip that away, our

Speaker #4: growing this fast, we should be mid-single digits. We are

Speaker #3: incrementals will naturally improve.

Speaker #4: not backing off of

Speaker #4: that. That statement, I

Speaker #3: Back to where like we

Speaker #4: But I think what changes is every day, it seems like the AI portion and the tools that we're developing are helping us increase speed.

Max Tunnicliff: I think what changes is every day it seems like the AI portion and the tools that we're developing are helping us increase speed. I think one thing that's important is you saw it in June. June kind of shocked us a little bit in our revenue as far as our sequentials go. Really digging in, there was some one-off orders that we were able to get that we wouldn't normally have gotten, just from new business signing some one-off type orders.

Speaker #3: Say, if we're growing this fast, we should be—

Speaker #4: guess we'd say, I don't want to say commitment.

Speaker #3: mid-single digits. We are not backing off of

Speaker #4: Maybe that's a little too strong. But that we

Speaker #3: that.

Speaker #4: believe this business is set to

Speaker #3: That statement, I guess we'd say, I don't want...

Speaker #4: drive the

Speaker #4: And I think one thing that's important is you saw it in June. June kind of shocked us a little bit in our revenue, as far as our sequentials go.

Speaker #4: mid-20s when we're growing this fast. And so we'll get back

Speaker #3: to say commitment. Maybe that's a little too strong. But

Speaker #3: that we believe this business is.

Speaker #4: to that over

Speaker #4: time.

Speaker #3: set to drive the

Speaker #3: mid-20s when we're growing this fast. And

Speaker #3: Got it. Thank you.

Speaker #4: And really digging in, there was some one-off orders that we were able to get that we wouldn't normally have gotten just from new business signing some one-off type orders.

Operator: Got it. Thank you. Jeff, I guess my question, what would you do differently? Because I don't think that's really out in the world to get to Fastenal Co anyway. When I think about the past couple of years, over a year for growth, Florida, Dubai, and national accounts, et cetera. When you think about laying tools out ahead, what are the strategic engines you plan on bursting that pipeline here?

Speaker #3: So we'll get back to that over.

Speaker #3: time.

Speaker #3: I'd just like to question, what will you do?

Speaker #3: differently? Because I don't think that that's

Speaker #2: Got it. Thank

Speaker #2: you.

Speaker #2: you. And then, And then, Jeff, I'd Jeff, I'd just like to question what

Speaker #3: really applicable here at

Speaker #3: FASTNAL anyway. But when I think

Speaker #4: But a lot of the business that we're turning on, we're turning it on faster now because of the tools that we've built. And I think that it's part of our strategic planning, but it's happening a lot faster than I thought it would.

Max Tunnicliff: A lot of the business that we're turning on, we're turning it on faster now because of the tools that we've built. I think that it's part of our strategic planning, but it's happening a lot faster than I thought it would. Like I said, June was a little bit of a surprise to us. I think the sequentials are still in place, but moving forward in the direction, I don't see a lot of change with who Fastenal is as a whole. Blue Team first, decentralized decision-making, P&L accountability, promoting from within. That's all cultures we've built over the last 30, 40, 50 years. That's not going to change. What I do think we're going to look at harder and faster is the speed in which we go out and attain new business, grab new contracts, and expand our markets globally.

Speaker #3: about the past couple

Speaker #2: Will you do anything differently? Because I don't think that...

Speaker #2: that's really applicable

Speaker #3: of CEO eras and over the

Speaker #2: here at FASTNAL anyway.

Speaker #3: year of board growth and Florence

Speaker #2: But when I think about the—

Speaker #3: era, I don't know, FMI and national accounts, etc. When you

Speaker #2: past couple of CEO eras

Speaker #4: And like I said, June was a little bit of a surprise to us. I think the sequentials are still in place. But moving forward in the direction, I don't see a lot of change with what FAST who FAST is as a whole.

Speaker #2: and over the year of store growth and

Speaker #3: think about the range of tools that

Speaker #2: Florence era, I don't know, FMI

Speaker #3: FASTNAL has today, what are

Speaker #3: the strategic growth engines that

Speaker #2: and national accounts, etc. When you think about the range of

Max Tunnicliff: I think the sequentials are still in place, but moving forward in the direction, I don't see a lot of change with who Fastenal is as a whole. Blue Team first, decentralized decision-making, P&L accountability, promoting from within. That's all cultures we've built over the last 30, 40, 50 years. That's not going to change. What I do think we're going to look at harder and faster is the speed in which we go out and attain new business, grab new contracts, and expand our markets globally.

Speaker #3: you plan on leaning on to start the

Speaker #3: depth watch

Speaker #2: tools that FASTNAL has today,

Speaker #2: what are the strategic growth

Speaker #4: Good

Speaker #2: engines that you plan on leaning on

Max H. Tunnicliff: Good question. First, I'd say that this isn't a transition. We're staying with the strategy, and the strategy that we've dealt with for the last two years. The three key pillars are going to be unchanged. I think we'll still look to invest in enhanced services and gaining market share. I think what changes is

Speaker #4: First, I'd say

Speaker #4: that this that this

Speaker #4: Blue team first, decentralized decision-making. P&L accountability, promoting from within. That's all cultures and built over the last 30, 40, 50 years. That's not going to change what I do think is going to we're going to look at harder and faster as the speed in which we go out and attain new business, grab new contracts, and expand our markets globally.

Speaker #2: to start the depth watch

Speaker #4: isn't a transition.

Speaker #2: here?

Speaker #3: Good here?

Speaker #3: question.

Speaker #4: We're speaking with the strategy. And the strategy

Speaker #3: First, I'd say question.

Speaker #4: that we can deal with the last

Speaker #3: isn't a

Speaker #4: two years. The three strategic pillars

Speaker #3: transition. We're speaking with the

Speaker #4: are going to be unchanged, increasing sales

Speaker #3: strategy. And the strategy that we can deal with the

Speaker #4: effectiveness, enhancing our service

Speaker #4: expanding markets. But I think what changes

Speaker #3: last two years. The three

Speaker #4: is, every day it seems

Speaker #3: strategic pillars are going to be unchanged, increasing

Speaker #4: like the AI portion

Speaker #3: sales effectiveness, enhancing our

Jeff M. Watts: Every day is like the AI portion of tools that we've developed are helping to increase speed. I think one thing that's important that Todd mentioned, doing kind of a shock a little bit with revenue as far as our disposal scope and really taking everyone one-on-one orders that we were able to get with the new program done just from new business and one-off orders. A lot of the businesses that we're turning on and bringing on Fastenal as the tools that we develop. I think that is part of our strategic winning bid happening a lot faster than I thought it would. Like I said, Yunu is a bit of a surprise to us. I think there's a bunch of reasons in place, moving forward in this direction, I don't see a lot of reason for Fastenal's competitive advantage as a whole.

Speaker #5: Hey, Dave, I'll throw in one little tidbit there. If you characterize an era as the Flores era, that was actually Jeff had an incredibly big voice as did Casey, as did Bill.

Dan Florness: Hey, Dave, I'll throw in one little tidbit there. You characterized an era as the Florness era. Jeff had an incredibly big voice, as did Casey, as did Bill, when I think of what we were doing from a revenue, from a sales growth standpoint. You might characterize the last decade with a different name than Florness. You might say it was a Blue Team effort, I think that Blue Team effort continues.

Speaker #4: And the tools that we're developing are helping.

Speaker #3: service expanding markets. But I think what

Speaker #3: changes is every day it

Speaker #4: us increase speed. And I think one

Speaker #3: seems like the

Speaker #4: thing that's important that

Speaker #3: AI portion and the tools that we're developing

Speaker #4: you saw in June June kind of shocked us

Speaker #3: are helping us increase speed.

Speaker #4: A little bit on revenue, as far as our

Speaker #4: sequentials go. And really digging

Speaker #3: And I think one thing that's—

Speaker #4: in, there was some one-off orders that we

Speaker #3: important that you saw in June June kind

Speaker #5: When I think of from what we were doing from a revenue, from a sales growth standpoint, and you might characterize the last decade with a different name than Flores.

Speaker #4: were able to get that we wouldn't normally have.

Speaker #3: have shocked us a little bit on revenue as far

Speaker #4: gotten just from new

Speaker #3: as our sequentials go. And

Speaker #3: really digging in, there was some one-off

Speaker #4: business signing some one-off type

Speaker #4: orders. But a lot of the

Speaker #3: orders that we were able to get that we

Speaker #3: wouldn't normally have gotten

Speaker #4: business that we're turning in, we're turning it

Speaker #4: on faster now because of the tools that we've

Speaker #3: just from new business signing, some

Speaker #5: You might say it was a blue team effort. And I think that blue team effort continues.

Speaker #3: one-off type orders. But a

Speaker #4: built. And I think that is part

Speaker #4: of our strategic planning, but it's happening a lot.

Speaker #3: lot of the business that we're turning out,

Speaker #3: we're turning it out faster now because of the tools

Speaker #4: faster than I thought it would.

Speaker #4: And like I said, June was a little bit of

Speaker #3: that we've built. And I think

Speaker #3: Got it. Yeah, always a blue team effort. So thanks, everyone. Best of luck.

David Manthey: Got it. Yeah. Always a Blue Team effort. Thanks everyone. Best of luck.

Speaker #3: That is part of our strategic planning, but it's...

Speaker #4: a surprise to us. I think

Speaker #3: happening a lot faster than I thought it

Speaker #4: the sequentials are still in place,

Speaker #5: Thank you.

Speaker #4: but moving forward in the direction, I

Speaker #3: would. And like I said, June was a little...

Max Tunnicliff: Thank you.

Speaker #1: Thank you. Next question is coming from Ryan Merkel from William Blair. Your line is not live.

Operator: Thank you. Next question is coming from Ryan Merkel from William Blair. Your line is now live.

Speaker #4: don't see a lot of change with what

Speaker #3: bit of a surprise to

Speaker #3: us. I think the sequentials are still in place,

Speaker #4: Fastenal or who Fastenal is as a

Speaker #4: whole. Blue team

Speaker #3: but moving forward in the

Speaker #6: Hey, everyone. Good morning. And Dan, I want to echo Dave's comments. I can't believe this is your last call. It's been a great run, my friend.

Ryan Merkel: Hey, everyone. Good morning. Dan, I want to echo Dave's comments. I can't believe this is your last call. It's been a great run, my friend, and I wish you all the best.

Speaker #4: first, decentralized decision

Speaker #3: direction, I don't see a lot of change with

Jeff M. Watts: Moving feet first, decision-making, P&L ability, 20/20. That's all culture stuff we've built over the last 30 years. That's not going to change. What I do think that we're going to look at harder and faster is being liquid. We go out in the business, grabbing contracts and end up more and more globally.

Speaker #4: making. P&L accountability, money from

Speaker #3: what FASTNAL or who FASTNAL is as a

Speaker #4: within. That's all cultures and built over the last 30,

Speaker #3: whole.

Speaker #6: And I wish you all the best.

Speaker #4: 40, 50 years. That's not going

Speaker #3: Blue team first, decentralized decision

Speaker #1: Well, Ryan isn't 121 calls enough.

Dan Florness: Well, Ryan, it's been 121 calls and out.

Speaker #3: making. P&L accountability,

Speaker #4: to change. What I do think is going to

Speaker #6: Yeah, yeah. 20 years, Dan, we've been doing this. I can't believe it. But it's been a great run. Appreciate all your help. So I want to start on price cost.

Speaker #3: money from within. That's all cultures and built over the

Speaker #4: we're going to look at harder and

Ryan Merkel: Yeah. 20 years, Dan, we've been doing this. I can't believe it. It's been a great run. Appreciate all your help. I want to start on price cost. You made progress, but more to go. When do you think you'll get to neutral? I know that's kind of a hard question. Also comment on gross margins in Q3. Should we be thinking flat sequentially from Q2?

Speaker #4: faster the speed in which we go out and

Speaker #3: last 30, 40, 50 years.

Speaker #4: attain new business, grab new

Speaker #3: That's not going to change. What I do think is,

Speaker #4: contracts, and expand our markets

Speaker #3: We're going to look at harder.

Speaker #3: and the faster the speed at which we

Speaker #5: Hey, Dave, I'll throw him a

Speaker #5: little tidbit

Speaker #6: You made progress, but more to go. When do you think you'll get to neutral? I know that's kind of a hard question. And then also comment on gross margins and the third quarter.

Speaker #3: go out and attain new business, grab

Ryan Merkel: Hey, Dave, I'll zoom a little bit there. You characterized Zura as Ernest Zura. That was actually Jeff had the big voice as did CPS Bill when I showed him what we were doing with revenue, sales, and also family life. You might characterize Last Day Dave differently than you mean Ernest. You might be able to list a blueprint for it. AI blueprint for any of it.

Speaker #5: there. If you

Speaker #3: new contracts, and expand our markets

Speaker #5: characterize this era as

Speaker #3: globally.

Speaker #4: Hey, Dave, I'll globally.

Speaker #5: Florence era, that was

Speaker #4: throw in a little tidbit

Speaker #4: there. If

Speaker #5: actually Jeff had an

Speaker #5: incredibly big voice as

Speaker #4: you characterize this era as

Speaker #6: Should we be thinking flat sequentially from the second quarter?

Speaker #4: Florence era, that

Speaker #5: Did JP, as did Bill. When I think of...

Speaker #5: from what we were doing from a revenue

Speaker #4: was actually Jeff had

Speaker #5: sales growth standpoint,

Speaker #5: Right. Yeah, Ryan, I'll take that question to start, at least. The chipping away at the net negative 40 will continue. It has to for our business.

Speaker #4: an incredibly big

Speaker #4: voice as did JP, as did Bill. When I

Max Tunnicliff: Yeah. Ryan, I'll take that question to start, at least. The chipping away at the net -40 will continue. It has to for our business. As I said, we need to continue to grow. At our ROIC level, growth is first and foremost, but I want to reiterate, it's healthy growth. It's operating margin accretive growth. It's all those healthy things that you would expect us to push on as we have in the past decades. This chipping away is an important term because we might come into Q4 and be there, but it's not something that we are predicting. Give us some time. We're going to make some progress, but it'll be small on this net price cost position. Importantly, there continues to be cost increases in the marketplace, and everyone knows that. It's the headline.

Speaker #5: and you might

Speaker #4: Think of it from what we were doing from a

Speaker #5: characterize the last decade with a different

Speaker #4: revenue sales growth

Speaker #4: standpoint, and you

Speaker #5: name than Florness. You might say it

Speaker #5: was a blue team effort.

Speaker #4: might characterize the last decade with

Speaker #5: And I think the blue team effort

Speaker #5: continues.

Speaker #5: But as I said, we need to continue to grow. At our ROIC level, growth is first and foremost. But I want to reiterate, it's healthy growth.

Speaker #4: a different name than Florence. You might

Speaker #4: Say it was a Blue Team.

Speaker #3: Got it. Yeah, always

Speaker #4: effort. And I think the Blue Team effort—

Speaker #3: blue team effort. So thanks, everyone.

Jeff M. Watts: Got it. That was a blueprint for it. Well done. Thanks everyone.

Speaker #4: continues.

Speaker #3: Best of luck.

Speaker #5: Thank

Speaker #5: ank you. Thank

Speaker #1: Thank you.

Speaker #2: Got it.

Dan L. Florness: Thank you.

Speaker #3: Next you.

Speaker #2: Yeah, always blue team effort. So thanks,

Speaker #3: question is coming from Liam Merkel. From Liam

Ryan Merkel: Thanks.

Ryan Merkel: That's good. Hey everyone. Good morning. I want to say, Dave, I can't believe it's your last call. Had a great run with you, my friend, wish you all the best.

Speaker #5: It's operating margin accretive growth. So it's all those healthy things that you would expect us to push on as we have the past decades.

Speaker #3: Merkel, is that

Speaker #2: everyone. Best of

Speaker #3: right?

Speaker #2: luck.

Speaker #4: Thank you.

Speaker #6: Hi, everyone. Good morning. And

Speaker #6: Dan, I want to echo Dave's comment. I—

Speaker #2: Next question is coming from Ryan Merkel from

Speaker #6: can't believe this is your last call. It's been a

Speaker #2: William Branghamline. Is that

Speaker #2: right?

Speaker #6: great one, my friend. And I wish you all the

Speaker #5: But this chipping away is an important term because we might come into Q4 and be there, but it's not something that we are predicting.

Speaker #5: Hey, everyone. Good

Max Tunnicliff: This chipping away is an important term because we might come into Q4 and be there, but it's not something that we are predicting. Give us some time. We're going to make some progress, but it'll be small on this net price cost position. Importantly, there continues to be cost increases in the marketplace, and everyone knows that. It's the headline.

Speaker #5: Morning. And Dan, I want to echo Dave's

Speaker #6: best.

Speaker #1: Well, Ryan, it's been

Speaker #1: 121 calls and

Speaker #5: comment. I can't believe this is your last

Dan L. Florness: Well, Ryan, it's 121,000 miles.

Speaker #1: out.

Speaker #5: call. It's been a great one, my friend. And I wish

Speaker #6: Yeah. In 20 years, Dan, we've been doing this

Ryan Merkel: Yeah, 20 years and we don't know each other unbelievably. It's been a great run. Appreciate all your help. I want to start on FAST Talk. You made progress, but we're going to go. When do you think you'll hit neutral? I know that's kind of our question. Also comment on the gross margin being in Q3 or do you think we can see flat functionally H2 of the year?

Speaker #5: you all the best.

Speaker #6: I can't believe it. But it's been a great

Speaker #2: Well, Ryan, it's

Speaker #6: run. Appreciate all your help. So

Speaker #2: been 121 calls and

Speaker #2: out.

Speaker #6: I want to start

Speaker #5: So give us some time. We're going to make some progress, but it'll be small. On this net price cost position. Importantly, there continues to be cost increases in the marketplace.

Speaker #5: Yeah. In 20 years' time, we've

Speaker #6: on Chris

Speaker #5: I've been doing this, I can't believe it. But...

Speaker #6: Cox. You made progress, but

Speaker #5: it's been a great run. Appreciate all your

Speaker #5: help. So I want to start

Speaker #6: what a go. When do you think

Speaker #5: on Chris

Speaker #6: You'll get to neutral? I know that's kind of...

Speaker #5: Cox. He made

Speaker #6: a hard question. And

Speaker #5: progress, but what a go. When

Speaker #6: then also comment on gross

Speaker #5: And everyone knows that. It's the headline. And so keeping up with the new inflow of cost and chipping away at the old is a lot of effort.

Speaker #6: margins and the third quarter should you

Speaker #5: do you think he'll get to neutral? I know

Speaker #5: that's kind of a hard

Speaker #6: be thinking flat sequentially from

Max Tunnicliff: Keeping up with the new inflow of cost and chipping away at the old is a lot of effort. As I said, we're pleased with our 10 bips of chipping away, we'll continue to do that. Our commitment is to continue to offset cost to the best extent possible while growing this business very fast. As we think about growth margin profile, because at the end of the day, those questions just model into gross margin, you're spot on with the gross margin question as well. At this moment, we don't forecast. We do not provide guidance on gross margin. Unless there's some big up or down movement, we don't want to surprise you. At this moment, we don't see a big up or down movement. The gross margin profile should be fairly consistent with historical trends.

Speaker #5: question. And then also comment on

Speaker #6: the second

Speaker #6: quarter?

Speaker #5: gross margins and the third

Speaker #1: Right. Yeah, Ryan, I'll take

Speaker #1: that question to start, at

Speaker #5: Quarter, should he be thinking flat?

Max H. Tunnicliff: Yeah, Ryan, I'll take that question to start, at least. The chipping away at that negative order will continue. It happens throughout the business. As I said, we need to continue to grow. At our ROIC level, growth is first and foremost, I want to reiterate, healthy growth. It's operating margin free cash flow growth. It's all those themes and things that you expect Fastenal to have in the past decades. This chipping away is in terms of, to make a point there, it's not something that we're predicting. Give it time, we're going to make some profit, it'll be small on this net price exposure position. Importantly, there continues to be cost increases in the marketplace. Everyone knows it. It's the headline.

Speaker #5: As I said, we're pleased with our 10 bips of chipping away. And so we'll continue to do that. Our commitment is to continue to offset cost to the best extent possible while growing this business very, very fast.

Speaker #1: least.

Speaker #5: sequentially from the second

Speaker #5: quarter?

Speaker #4: Right. Yeah, Ryan, I'll take

Speaker #1: The chipping away at the net negative 40.

Speaker #4: that question to start,

Speaker #4: at

Speaker #1: will continue. It has to

Speaker #4: at least. The chipping away at the net

Speaker #1: for our

Speaker #1: business. But as I said,

Speaker #5: As we think about gross margin profile, because at the end of the day, those questions just model into gross margin and so your point, you're spot on with the gross margin question as well.

Speaker #4: negative 40 will continue. It

Speaker #1: we need to continue to

Speaker #1: grow. At our

Speaker #4: has to for our

Speaker #4: business. But as I

Speaker #1: ROIC level, growth is first and

Speaker #4: said, we need to

Speaker #1: foremost. But I want to reiterate,

Speaker #4: continue to grow. At

Speaker #1: it's healthy growth.

Speaker #1: It's operating margin accreting

Speaker #4: our ROIC level, growth

Speaker #5: At this moment, we don't forecast or sorry, I shouldn't say forecast. We do not provide guidance on gross margin. Unless there's some big up or down movement, we don't want to surprise you.

Max Tunnicliff: At this moment, we don't forecast. We do not provide guidance on gross margin. Unless there's some big up or down movement, we don't want to surprise you. At this moment, we don't see a big up or down movement. The gross margin profile should be fairly consistent with historical trends.

Speaker #4: is first and foremost. But I want to

Speaker #1: growth. So it's all those healthy things that—

Speaker #4: reiterate, it's healthy

Speaker #1: you would expect us to push on as we have

Speaker #4: growth. It's operating

Speaker #1: the past

Speaker #1: decades. But this chipping

Speaker #4: margin accreting growth. So it's all those

Speaker #1: away is an important term

Speaker #4: healthy things that you would expect us to push

Speaker #1: because

Speaker #4: on as we have the past

Speaker #5: At this moment, we don't see a big up or down movement. So the gross margin profile should be fairly consistent with historical trends. And as you probably know, and I'll just remind the audience, because of our I shouldn't say primarily because of our focus on growing large strategic accounts, for all the reasons that probably make sense, efficiencies in leverage and those types of things, those accounts carry less gross margin as a percentage than our weighted average.

Speaker #4: decades. But

Speaker #1: we might come into Q4 and be there,

Speaker #4: this chipping away is an important

Speaker #1: but

Speaker #1: it's not something that we are

Speaker #4: term

Speaker #4: because we might come into Q4

Speaker #1: Predicting. So give us some time.

Max Tunnicliff: As you probably know, and I'll just remind the audience, I should say primarily because of our focus on growing large strategic accounts, for all the reasons that probably make sense, efficiencies and leverage and those types of things. Those accounts carry less gross margin as a percentage than our weighted average. This is nothing different than has happened the past 10 to 20 years. We will continue. If you look at that 10-year pattern, you see about a 60 basis point contraction in gross margin, albeit maintaining to improving operating margin, which is our focus area. That 60 basis points improvement, as you know from your modeling, it's roughly 15 bips of sequential decline every quarter. If you look back between Q2 and Q3, you get roughly that.

Speaker #4: and be there, but

Speaker #1: We're going to make some profits, but it'll

Speaker #4: it's not something that

Speaker #1: be small. On this net price cost,

Speaker #4: we are predicting. So give us some

Speaker #1: position.

Speaker #1: Importantly, there continues to

Speaker #4: time. We're going to make some

Speaker #1: be cost increases in the

Speaker #4: profits, but it'll be small. On this

Speaker #1: marketplace. And

Speaker #4: net price cost position.

Speaker #1: everyone knows that it's the

Speaker #4: Importantly, there continues

Speaker #1: headline. And

Speaker #4: to be cost increases in the

Speaker #1: so keeping up with the new

Speaker #4: marketplace.

Jeff M. Watts: Keeping up with new inflow of cost and keeping it at gold is a lot of effort, as I said, where piece by piece are chipping away. What we need to do that, our commitment is to continue to offset cost the best as possible while we're growing the business very, very fast. To think about gross margin profile, because at the end of the day, it was the first time I've seen us model gross margin. Your point is spot on. Gross margin as well. At the moment, we don't forecast for Sorry, I shouldn't say this. We do not bite into gross margin unless there's some big up or down movement that want to surprise you. At this moment, we don't see a big up or down movement. The gross margin profile should be fairly consistent quarter on quarter trends.

Speaker #4: And everyone knows that it's the

Speaker #1: inflow of cost and chipping away at the

Speaker #4: headline. And

Speaker #1: old is a lot of effort. As I

Speaker #4: so keeping up with

Speaker #1: said, we're pleased with our

Speaker #5: This is nothing different than has happened the past 10 to 20 years. And so we will continue if you look at that 10-year pattern, you see about a 60 basis point contraction in gross margin albeit maintaining to improving operating margin, which is our focus area.

Speaker #4: the new inflow of cost and chipping

Speaker #1: Ten bits of chipping away. And so we'll continue.

Max Tunnicliff: This is nothing different than has happened the past 10 to 20 years. We will continue. If you look at that 10-year pattern, you see about a 60 basis point contraction in gross margin, albeit maintaining to improving operating margin, which is our focus area. That 60 basis points improvement, as you know from your modeling, it's roughly 15 bips of sequential decline every quarter. If you look back between Q2 and Q3, you get roughly that.

Speaker #4: Chipping away at the old is a lot of effort.

Speaker #1: to do that. Our commitment is to continue to

Speaker #4: As I said, we're pleased with...

Speaker #1: offset costs to the best extent

Speaker #4: our 10 bits of chipping away. And

Speaker #1: possible while growing this business very, very

Speaker #1: fast. If we think

Speaker #4: so we'll continue to do that. Our commitment is

Speaker #1: about gross margin profile,

Speaker #4: to continue to offset costs to the

Speaker #4: best extent possible while growing this business very,

Speaker #1: because at the end of the day, those questions

Speaker #1: just modeling the gross margin

Speaker #4: very fast. If we think

Speaker #1: and so your point, you're spot

Speaker #4: about gross margin

Speaker #5: And so that 60 basis points improvement, as you know from your modeling, it's roughly 15 bips of sequential decline every quarter. And so if you look back between Q2 and Q3, you get roughly that.

Speaker #4: profile, because at the end of the day, those

Speaker #1: on. Gross margin question as

Speaker #1: well. At this

Speaker #4: Questions just modeling the gross margin.

Speaker #1: moment, we don't

Speaker #4: and so your point,

Speaker #1: forecast or sorry, I shouldn't say forecast.

Speaker #4: you're spot on gross margin question as

Speaker #4: well. At

Speaker #1: We do not provide guidance on gross.

Speaker #1: margin. Unless there's some

Speaker #4: this moment, we

Speaker #4: don't forecast or sorry, I

Speaker #1: big up or down movement, we don't want to surprise

Speaker #5: You get between 10 and 20 bips drop just on a normal year when FAST is performing well and when FAST is maintaining or growing operating margins.

Max Tunnicliff: You get between 10 and 20 bips drop just on a normal year when Fastenal is performing well and when Fastenal is maintaining or growing operating margins. Our commitment to ourselves and our shareholders is grow fast and continue to maintain and grow operating margins. That's what we see as we move through the rest of this year.

Speaker #1: you. At this moment, we don't see a

Speaker #4: shouldn't say forecast. We do not provide guidance

Speaker #4: on gross margin. Unless there's

Speaker #1: big up or down movement. So

Speaker #4: some big up or down movement, we don't want to

Speaker #1: the gross margin profile

Speaker #1: should be fairly consistent with historical

Speaker #4: surprise you. At this moment, we

Speaker #5: So our commitment to ourselves and our shareholders is grow fast and continue to maintain and grow operating margins. And so that's what we see for as we move through the rest of this year.

Speaker #4: Don't see a big up or down.

Speaker #1: trends.

Speaker #1: And as you probably know

Speaker #4: movement. So the gross margin

Speaker #4: profile should be fairly

Jeff M. Watts: As you probably know, not online, in the audience, primarily because of our focus on growing large strategic accounts, for all the reasons that probably make sense, efficiencies and leveraging those types of things. Those accounts carry less gross margin as a percentage than our other average. This is nothing different as it happened in the past 10 to 20 years. We will continue. If you look at that 10-year pattern, you see about a 60 basis point contraction in gross margin, albeit may maintain improving operating margin, our focus there. That 60 basis improvement, as you look at your modeling, it roughly fits to the punch of the current year forward.

Speaker #1: from the audience, because

Speaker #4: consistent with historical trends.

Speaker #1: of our I

Speaker #4: And as you probably

Speaker #1: should say primarily because of our focus on

Speaker #6: Got it. Okay. No, that's all fair. I appreciate that. Just a follow-up, maybe to Dave's questions on incremental margins. Should we be calibrating to maybe low 20s incremental margins for 2026 at this point?

Speaker #4: know from mine, the

Speaker #1: growing large… strategic focus on growing large.

Ryan Merkel: Got it. Okay. No, that's all fair. Appreciate that. Just to follow up maybe to Dave's questions on incremental margins. Should we be calibrating to maybe low 20s incremental margins for 2026 at this point, and if you make faster progress on the price cost, then maybe you get into mid-20s?

Speaker #4: audience, because of

Speaker #1: accounts, for all the reasons that

Speaker #4: our I should say primarily because of our

Speaker #1: probably make sense,

Speaker #1: efficiencies and leverage and those types of

Speaker #4: strategic accounts, for all the

Speaker #1: things, those

Speaker #4: reasons, that probably makes

Speaker #1: accounts

Speaker #1: carry less gross margin as a

Speaker #4: sense. Efficiencies and leverage and

Speaker #6: And if you make faster progress on the price cost, then maybe you get in the mid-20s?

Speaker #1: percentage than our weighted average. This is

Speaker #4: those types of

Speaker #4: things. Those accounts

Speaker #1: nothing different than has happened the past

Speaker #4: carry less gross margin as

Speaker #1: 10 to 20 years. And

Speaker #1: so we will continue if you look

Speaker #4: a percentage than our weighted

Speaker #3: Right. Q2 is this is hope, but we see in '21 and a half on our P&L with this much growth is not I would just say we hope that's our low point, but it's hard to predict with the cost inflation coming through.

Speaker #4: average. This is nothing different than has

Speaker #1: at that 10-year pattern,

Max Tunnicliff: This is hope. Seeing 21.5 on our P&L with this much growth is not I would just say we hope that's our low point, but it's hard to predict with the cost inflation coming through. I think that's a safe bet. I think it's safe to do it that way. As we chip away, we should be able to expand. We have a low point, and we'd be heading toward the normal run rate business of mid-20s. It's tough to predict whether that's the end of Q3, if that's Q4. In that ballpark. Expect improvement as we move throughout. I wouldn't necessarily expect a Q3 jump all the way up to the mid-20s.

Speaker #4: happened the past 10 to 20

Speaker #1: you see about a 60 basis

Speaker #4: years. And so we will

Speaker #1: point contraction gross margin

Speaker #4: continue if you look at that 10-year

Speaker #1: albeit

Speaker #1: maintaining or improving operating

Speaker #4: pattern, you see about a 60

Speaker #1: margin, which is our focus area. And

Speaker #4: basis point contraction in gross

Speaker #4: margin

Speaker #1: so that 60 basis points

Speaker #4: albeit maintaining or improving

Speaker #1: improvement, as you know from your

Speaker #1: modeling, it's roughly 15

Speaker #4: Operating margin, which is our focus,

Speaker #4: area. And so, that 60 basis points

Speaker #1: bits of sequential decline every

Speaker #3: I think that's a safe bet. I think it's safe to do it that way. But as we chip away, we should be able to expand.

Speaker #1: quarter. And so if you look back,

Speaker #4: improvement, as you know from your

Speaker #4: modeling, it's

Speaker #1: between Q2 and Q3,

Jeff M. Watts: If you look back in Q2 2023, you get roughly that, between 10 to 15 basis points of gross margin run rate on a year-over-year basis while doing well and while Fastenal is maintaining or growing operating margin. Our view on sell through this year is it grows fast and we need to maintain and grow our operating margin. That's what we aim for as we move through the rest of this year.

Speaker #4: roughly 15 bits of sequential decline every

Speaker #1: you get roughly that. You get between 10 and

Speaker #1: 20 bits drop just on a normal year when

Speaker #4: quarter. And so if you

Speaker #3: I mean, we have a low point, and we'd be heading toward the normal run rate business of mid-20s. It's just tough to predict whether that's Q the end of Q3, if that's Q4.

Speaker #4: look back between Q2 and

Speaker #1: FASTNAL is performing well and when

Speaker #4: Q3, you get roughly that. You get

Speaker #1: FASTNAL is maintaining or growing

Speaker #1: operating margins. So our commitment to

Speaker #4: between 10 to 20 basis points drop just on a

Speaker #4: normal year when FASTNAL is performing well

Speaker #1: ourselves and our shareholders is go

Speaker #1: fast and continue to maintain

Speaker #4: and when FASTNAL is maintaining or

Speaker #3: But in that ballpark, expect improvement as we move. Throughout. But yeah, it's not going to I wouldn't necessarily expect a Q3 jump all the way up to the mid-20s.

Speaker #4: growing operating margins. So

Speaker #1: and grow operating margins. And so that's what

Speaker #4: our commitment to ourselves and our shareholders

Speaker #1: we see, as we move through the rest

Speaker #4: is go fast and continue to

Speaker #1: of this year.

Speaker #4: maintain and grow operating margins.

Speaker #6: Got it. Okay. No, that's all good. I

Speaker #6: appreciate that. Just a

Speaker #4: And so that's what we see for as we

Ryan Merkel: Got it. No, that's all good. Appreciate that. Just a follow-up, Dave, to last question on the margin. Should we be calibrating to maybe below 20s gross margin for 2026 at this point and may make FAST stock progress despite and maybe get into 20s?

Speaker #6: follow-up to Dave's questions. I know from a

Speaker #4: move through the rest of this

Speaker #4: year.

Speaker #6: Okay.

Speaker #6: margin should we be

Speaker #3: It's your model. Yeah.

Speaker #5: Got it. Okay. No, that's all

Ryan Merkel: Okay.

Max Tunnicliff: It's your model.

Speaker #6: calibrating to maybe low

Speaker #5: good. I appreciate that. Just a

Ryan Merkel: Fair.

Max Tunnicliff: Yep.

Speaker #6: 20s on a margin

Speaker #5: follow-up to Dave's questions. I know

Speaker #6: All right. Thank you. I'll pass it on.

Ryan Merkel: All right. Thank you. I'll pass it on.

Speaker #6: per 26 at this point?

Speaker #5: from a margin should we be

Speaker #6: And if you make faster progress

Speaker #5: calibrating to maybe

Operator: Thank you. Next question is coming from Tommy Moll from Stephens. Your line is now live.

Speaker #1: Thank you. Next question is coming from Tommy Mall from Stevens. Your line is now live.

Speaker #6: in price, cost, and maybe get

Speaker #5: low 20s on a

Speaker #5: margin per 26 at this

Speaker #6: into the

Speaker #6: 20s?

Speaker #5: Good morning, and thank you for taking my questions.

Speaker #5: Point? And if you make it faster—

Tommy Moll: Good morning, thank you for taking my questions.

Speaker #5: progress in price cost and

Speaker #7: Morning, Tommy.

Operator: Good morning, Tommy.

Dan Florness: Good morning, Tommy.

Speaker #5: maybe get into the

Speaker #1: Q2

Speaker #5: First question on SG&A. Point taken, you paid some pretty healthy bonuses and commissions this quarter given the strong top-line performance. At the same time, I would think you might still expect to see some leverage, just thinking about those items as a percentage of sales.

Speaker #5: 20s?

Tommy Moll: First question on SG&A. Point taken, you paid some pretty healthy bonuses and commissions this quarter, given the strong top-line performance. At the same time, I would think you might still expect to see some leverage, just thinking about those items as a percentage of sales, rather than deleverage. Could you help us unpack some of the items that delevered this quarter? I wouldn't think that at this rate of sales growth, we should expect those to continue to delever, but any context would help. Thank you.

Speaker #1: is this is hope, but

Max H. Tunnicliff: Q2, this is hope, but we've seen some of the math on our P&L with some of the growth. I would say we hope that's our low point, but hard to predict with the inflation coming through. I think it's a safe bet. I think it's a safe bet that way, that chip away we should be able to expand. When we have a low point and then you work to normal run rate business, mid-20s, it's tough to predict whether that be end of Q3 into Q4, but in that ballpark. Expect the business to move throughout. I wouldn't expect Q3 to come all the way up to mid-20s.

Speaker #4: Hi.

Speaker #1: we see it coming on the half on our

Speaker #4: Q2

Speaker #1: P&L growth is not— I would just...

Speaker #4: is this is hope, but

Speaker #4: We see it coming on the half-on.

Speaker #1: say we hope that's our low point,

Speaker #1: But it's hard to predict what the—

Speaker #4: our P&L. Growth is

Speaker #4: not I would just say we hope that's our

Speaker #1: cost inflation coming through. I

Speaker #1: think that's a safe

Speaker #1: Bet. I think it's safe to do it.

Speaker #4: low point, but it's hard to

Speaker #4: Predict what the cost inflation is coming.

Speaker #1: that way. But as we

Speaker #5: Rather than deleverage, and so could you help us unpack some of the items that delevered this quarter? I wouldn't think that at this rate of sales growth, we should expect those to continue to delever but any context would help.

Speaker #4: through. I think that's a safe assumption.

Speaker #1: chip away, we should be able to expand. I mean, we have

Speaker #4: bet. I think

Speaker #1: a low point, and we'll be heading toward

Speaker #4: it's safe to do it that

Speaker #1: the normal run-rate business of

Speaker #4: way. But as we chip away, we should be able to

Speaker #1: mid-20s. It's just tough to

Speaker #4: expand. I mean, we have a low point, and we'll be heading

Speaker #1: Predict whether that's Q2, the end of—

Speaker #4: toward the normal run rate

Speaker #1: Q3, Q4. But in

Speaker #4: business of mid-20s. It's

Speaker #1: that ballpark, expect

Speaker #5: Thank you.

Speaker #4: it's just tough to predict whether that's

Speaker #7: So keep in mind, SG&A did lever about 90 basis points.

Speaker #1: improvement as we move.

Max Tunnicliff: Keep in mind, SG&A did lever about 90 basis points.

Speaker #1: Throughout. But yeah, it's not going.

Speaker #4: Q the end of Q3,

Speaker #4: Q4. But in that ballpark,

Speaker #1: to I wouldn't necessarily expect

Speaker #1: a Q3 jump all the way.

Speaker #4: expect improvement as we move.

Speaker #5: Oh, yeah. Yeah, yeah. Point taken.

Tommy Moll: Oh, yeah.

Speaker #4: Throughout. But yeah, it's not going.

Speaker #1: up to

Max Tunnicliff: Yeah.

Speaker #1: mid-20s. It's your

Tommy Moll: Point taken.

Speaker #7: Yeah, we didn't see deleverage. Yeah, sorry, go ahead.

Speaker #4: to I wouldn't necessarily

Max Tunnicliff: Yeah, we didn't see deleverage. Yeah, sorry, go ahead.

Speaker #4: expect a Q3

Speaker #1: model.

Speaker #1: Yeah. All

Speaker #5: Yeah, it was more specifically talking about the items you referenced that did delever this quarter. I think it was fuel transportation, travel, bonuses, commissions.

Speaker #4: jump all the way up to the

Tommy Moll: Yeah, I was more specifically talking about the items you referenced that did delever this quarter. I think it was fuel, transportation, travel, bonuses, and commissions. There were a number of things mentioned on the call and in your materials that did delever. That's specifically what I was curious about.

Speaker #4: mid-20s.

Speaker #6: All right. Thank

Speaker #6: you.

Ryan Merkel: Okay.

Max H. Tunnicliff: In my mind, that's it.

Speaker #5: Okay.

Speaker #4: It's your

Speaker #4: model. Yeah.

Speaker #1: Thank

Speaker #1: you.

Speaker #3: Next question is coming from Tommy Malton.

Tommy Moll: All right. Thank you, Fastenal.

Speaker #5: right. Thank you.

Speaker #3: right?

Speaker #5: Awesome.

Speaker #1: Good morning. Thank you for taking my question.

Speaker #5: There were a number of things mentioned on the call and in your materials that did delever. That's specifically what I was curious about.

Dan L. Florness: Can I take a few questions real quick?

Speaker #1: question.

Speaker #3: Thank you.

Speaker #2: Next question is coming from

Tommy Moll: You may. You are live. Good morning. Thank you so much for the question.

Speaker #7: Good

Speaker #7: morning. Morning,

Speaker #2: Tommy Malton: Steven, your line is not live.

Speaker #1: First

Speaker #1: question on

Speaker #1: SG&A. Point taken, you paid some

Speaker #4: Good morning. Thank you for

Speaker #7: Yeah, sure. So and I'll speak a little bit about. But we started just on fuel. As you can imagine, it's extremely volatile. If you had asked me two weeks ago what I thought the future would hold, I would give you a different answer.

Speaker #4: taking my question.

Dan L. Florness: Morning, Jeff.

Max Tunnicliff: Yeah, sure. I'll speak a little bit about. We started just on fuel. As you can imagine, it's extremely volatile. If you would've asked me 2 weeks ago what I thought the future would hold, I would give you a different answer, of course. First of all, the fuel component in our SG&A, and we don't talk about the amount, but it sits in that remaining 30%. Dan, we've historically in the past referenced 70% of our SG&A are people-related costs. You do have a component of fuel in there that we started to see in Q1 as the conflict escalated. We experienced about a month of that headwind, and now we have 3 months of that headwind.

Speaker #3: Morning.

Speaker #1: pretty healthy bonuses and

Speaker #4: Tom.

Tommy Moll: First question on SG&A. Point taken that you paid some pretty healthy bunch of things in this quarter given the strong appliance performance. At the same time, I would think you might still like to see some leverage just thinking about those items that were presented in the bill, whether that's D leverage. Could you help us unpack some of the items, the D leverage this quarter? I wouldn't think that just rate, the sales growth could explain those continuing D leverage. Any context would help. Thank you.

Speaker #1: commissions this quarter given

Speaker #3: First question on

Speaker #1: the strong upline

Speaker #3: SG&A. Point taken, you

Speaker #1: performance. At the same time,

Speaker #3: paid some pretty healthy

Speaker #3: Bonuses and commissions given this quarter.

Speaker #1: I would

Speaker #1: think you might still expect to,

Speaker #7: Of course. First of all, the fuel component in our SG&A we don't talk about the amount, but it sits in that remaining 30%. Dan, we've historically in the past referenced 70% of our SG&A people-related costs.

Speaker #3: the strong

Speaker #3: upline performance. At the same

Speaker #1: see some leverage, just thinking

Max Tunnicliff: First of all, the fuel component in our SG&A, and we don't talk about the amount, but it sits in that remaining 30%. Dan, we've historically in the past referenced 70% of our SG&A are people-related costs. You do have a component of fuel in there that we started to see in Q1 as the conflict escalated. We experienced about a month of that headwind, and now we have 3 months of that headwind.

Speaker #1: about those items as a

Speaker #3: time, I would

Speaker #3: think you might still

Speaker #1: percentage of sales. Rather

Speaker #3: expect to see some leverage, just thinking

Speaker #1: than deleverage, and

Speaker #1: so could you help us

Speaker #3: about those

Speaker #1: unpack some of the items that

Speaker #3: items as a percentage of

Speaker #3: sales. Rather than

Speaker #1: deleveraged this quarter? I wouldn't think that at

Speaker #3: deleverage, and so could you help us

Speaker #1: this rate of sales growth, we should

Speaker #7: So you do have a component of fuel in there that we started to see in Q1 as the conflict escalated. We experienced about a month of that headwind, and now we have three months of that headwind.

Speaker #1: We expect those to continue to deleverage.

Speaker #3: unpack some of the items that

Speaker #1: But any contact would help. Thank you.

Speaker #3: deleverage this quarter? I wouldn't

Speaker #1: you.

Speaker #3: think that at this rate of sales

Speaker #7: So keep in mind,

Speaker #3: growth, we should expect those to continue to

Speaker #7: SG&A did leverage about 90

Speaker #3: Deleverage. But any contact would help.

Speaker #7: basis points.

Speaker #3: Thank you.

Max H. Tunnicliff: Keep in mind, SG&A did leverage 90 basis points.

Speaker #7: And that's one of those areas where even from the question of incrementals, I mean, if those fuel costs associated oil-related costs dive, more toward the second half of this year, we're going to start to see even some improvement incrementals there.

Speaker #4: So keep

Max Tunnicliff: That's one of those areas where even from the question of incrementals, if those fuel costs and associated oil-related costs dive more toward H2 of this year, we're going to start to see even some improvement incrementals there. Fuel is one of those that we're actually, given the amount of volatility, we're managing very well on a fuel side. It's still a headwind. We mentioned the bonus, and the bonus is just we grew profit dollars

Speaker #1: Oh,

Speaker #1: yeah. Yeah. Point

Speaker #4: in mind, SG&A did leverage

Speaker #1: taken.

Speaker #4: about 90 basis

Speaker #7: Yeah, we didn't see

Speaker #4: points.

Speaker #7: deleverage. Go

Tommy Moll: Oh, yeah. Point taken. I heard the word.

Speaker #7: ahead.

Speaker #3: Oh, yeah. Yeah.

Speaker #1: Yeah, I was more

Speaker #3: Point taken.

Speaker #1: specifically talking about the items you...

Max H. Tunnicliff: It didn't take any leverage. Yeah, go ahead.

Speaker #4: Yeah, we didn't

Speaker #4: see leverage. Yeah, sorry. Go

Speaker #1: referenced. That did

Speaker #4: ahead.

Speaker #1: deleverage this quarter. I think it

Tommy Moll: Yeah, I was specifically talking about items you referenced that did deleverage the quarter. I think it was fuel, transportation, travel, bonuses, and commissions. There were a number you mentioned on the call and in your material that did deleverage. That's specifically what I was curious about.

Speaker #7: But fuel is one of those that we're actually given the amount of volatility we're managing very well on a fuel side. It's still a headwind.

Speaker #1: was fueled transportation, travel,

Speaker #3: Yeah, I

Speaker #3: was more specifically talking about the

Speaker #3: items you referenced. That

Speaker #1: bonuses, commissions. There were a

Speaker #1: number of things mentioned on the call and in

Speaker #3: did deleverage this quarter. I think it

Speaker #3: was fueled transportation,

Speaker #1: your materials that did deleverage.

Speaker #3: travel, bonuses,

Speaker #1: That's specifically what I was curious

Speaker #7: And then we mentioned the bonus. And the bonus is just a pure we grew profit dollars extremely fast. And we like the fact that that's a headwind is a good thing for us, but it's in it's part of our business modeling as well.

Speaker #3: commissions. There were a number of things mentioned on the

Speaker #1: about.

Speaker #7: Yeah, sure.

Speaker #7: So, I'll speak a little bit about—

Speaker #3: call and in your materials that did

Speaker #7: But we started just on

Speaker #3: deleverage. That's specifically what I was

Speaker #7: fuel. As you can imagine,

Dan L. Florness: I'll speak a little bit about, we started on fuel as you can imagine, extremely cautious. If you'd have asked me week-to-week or what I thought we should hold, I would give you a different answer. Of course. First of all, the fuel component in our SG&A, we're not talking about a mote. It's in that range, 30%. We've historically, in the past, spent 70% of our SG&A on related costs. You do have some room there that we've credited in Q1 as the conflict escalated. We've spent much of that headroom, and now we've pretty much hit headroom. That's one of those areas where even the question for minimal, if those fuel costs in associated fuel really get tied more towards impact costs this year, we'll start to see even some improvement there.

Speaker #3: curious about.

Jeff Watts: extremely fast. We like the fact that that's a headwind is a good thing for us, but it's part of our business modeling as well. Aside from that, there's not anything else that would be delevered in our SG&A is very small, and we keep a very keen eye. I think you know us well, Tommy, we are frugal operators, and we don't intend to change that frugality approach in our business because it does well for our business.

Speaker #4: Yeah, sure.

Speaker #4: So I'll speak a little bit

Speaker #7: it's extremely volatile. If you had asked me two weeks can imagine, extremely volatile.

Speaker #4: about. But we started just on

Speaker #7: ago, what I thought the future would hold, I would give you a different

Speaker #7: answer. Of

Speaker #4: fuel. As you

Speaker #7: course. First of

Speaker #7: So aside from that, there's not anything else that would be delevered in our SG&A is very small. And we keep a keen a very keen eye.

Speaker #7: all, the fuel component in

Speaker #4: If you had asked me two weeks ago, what I thought the future would hold, I would

Speaker #7: our

Speaker #4: give you a different answer. Of

Speaker #7: SG&A we don't talk about the amount,

Speaker #4: course. First of

Speaker #4: all, the fuel

Speaker #7: I think you know us well, Tommy. We're a frugal operators, and we don't see we don't intend to change that frugality approach in our business because it does well for our business.

Speaker #7: But it sits in that remaining.

Speaker #7: 30%. And

Speaker #4: component in our

Speaker #4: SG&A we don't talk about the

Speaker #7: We've historically, in the past, referenced 70%.

Speaker #4: amount, but it sits in that remaining.

Speaker #7: of our SG&A that people related

Speaker #7: cost. So, you do have a component of fuel in

Speaker #4: 30%.

Speaker #4: And we've historically, in the past,

Speaker #7: there that we started to see in

Speaker #4: referenced 70% of our SG&A that people

Speaker #7: Q1 as

Speaker #7: A preference I'll give you. I was talking to Barry McGrave. Barry runs our distribution center here in Winona. A few days ago, and I said to Barry, I know when I look out my window, how many trucks I see, but how many routes do we have that go out of Winona on a given day?

Dan Florness: For instance, I'll give you, I was talking to Barry McGriff. Barry runs our distribution center here in Winona a few days ago, and I said to Barry, "I know when I look out my window how many trucks I see, but how many routes do we have out of Winona on a given day?" He says, "Oh, depending on the date, anywhere from 25 to 30, depending on what day of the week it is." That's how many trucks. We have Winona routes, there's probably about 470 routes when you start looking at all the different places the trucks go. We drive about 95,000 miles a week just in this one service area in the Midwest out of Winona, Minnesota. The reality of it is, a semi-tractor gets a little over 7 miles to the gallon.

Speaker #7: the conflict escalated.

Speaker #4: related cost. So you do have a component

Speaker #7: We spent about a month of that headwind. And

Speaker #4: of fuel in there that we started to

Speaker #4: see in Q1 as

Speaker #7: Now we have pretty much that headwind, and—

Speaker #4: the conflict

Speaker #7: that's one of those areas where even

Speaker #4: escalated. We spent about a month of that,

Speaker #7: From the question of incrementals, I mean, if...

Speaker #4: headwind, and now we have pretty much that

Speaker #7: those fuel

Speaker #7: costs in associated oil-related costs

Speaker #7: And he says, "Oh, it's depending on the date." Anywhere from 25 to 30, depending on what day of the week it is. And that's how many trucks and so we have Winona routes.

Speaker #4: headwind. And that's one of those areas

Dan Florness: He says, "Oh, depending on the date, anywhere from 25 to 30, depending on what day of the week it is." That's how many trucks. We have Winona routes, there's probably about 470 routes when you start looking at all the different places the trucks go. We drive about 95,000 miles a week just in this one service area in the Midwest out of Winona, Minnesota. The reality of it is, a semi-tractor gets a little over 7 miles to the gallon.

Speaker #4: Where, even from a question of...

Speaker #7: drive, more toward the second

Speaker #4: incrementals, I mean, if those fuel

Speaker #7: half of this year, we're going to start to

Speaker #4: costs and associated oil-related

Speaker #7: see even some improvement incrementals

Speaker #7: there. But fuel is one of those

Speaker #4: costs drive, more

Speaker #7: that we're actually,

Speaker #4: toward the second half of this year, we're going to start

Speaker #7: There's probably about 470 routes when you start looking at all the different places the trucks go. And we drive about 95,000 miles a week just in this one serviced area in the Midwest out of Winona, Minnesota.

Speaker #7: Given the amount of volatility we're experiencing,

Speaker #4: to see even some improvement in

Max H. Tunnicliff: Fuel is one of those that we're actually given the amount of volatility, we manage it very well on a fuel side. It's still a headroom. Then we mentioned the bonus, the bonus is just pure, we grew profit dollars extremely fast, and we like the fact that that's a headroom we can compress within. It's part of our business model as well. Aside from that, there's not anything else that we delevered in our structure at all. I think you know as well, Thomas, we are frugal operators, and we don't see any reason to change that frugal approach in our business because it does well for our business. No. Go for it. Talking to Terry very recently, he runs our distribution center here in Winona a few days ago when I went in.

Speaker #4: incrementals there. But fuel is one of those.

Speaker #7: managing very well, on a fuel

Speaker #7: side, it's still a headwind. And then—

Speaker #4: that we're

Speaker #4: actually, given the amount of

Speaker #7: We mentioned the bonus, and the

Speaker #4: volatility we're managing very well, on a

Speaker #7: Bonus is just a pure—we

Speaker #4: fuel side, it's still a

Speaker #7: grew profit

Speaker #7: dollars extremely fast. And

Speaker #4: headwind. And then we mentioned the

Speaker #7: And so the reality of it is, is a semi-tractor gets a little over seven miles to the gallon, you're going to spend if the price is up 10%, 20%, 30%, you pick the number, we're going to spend that much more.

Speaker #4: bonus. And the bonus is just

Speaker #7: We like the fact that that's a—

Speaker #4: pure we grew profit

Speaker #7: Headwind is a good thing for us, but it's

Speaker #4: dollars extremely

Speaker #7: in it's part of our business modeling as

Speaker #7: well. So aside from

Speaker #4: fast. And we like the fact that

Dan Florness: You're going to spend, if the price is up 10%, 20%, 30%, you pick the number, we're going to spend that much more. That's the bad news. The good news is that burden falls a lot heavier on competitors we have in this space. Quite frankly, it falls pretty high on our customers. We become a better value proposition because even though our costs have gone up, our costs are at a discount to any other option that's out there, because so much of our industry ships small parcel. It actually, chaotic times like this, we have to manage through the SG&A of it, and most of that diesel that I'm talking about is actually in gross margins, not in SG&A, whereas our small fleet's in SG&A. It positions us to be more successful and bring a better value proposition to the customer.

Speaker #7: that, there's not

Speaker #4: That's a headwind; it's a good thing for us, but it's—

Speaker #7: Anything else that would be deleveraged in our SG&A is very—

Speaker #4: It's part of our business modeling.

Speaker #4: as well. So aside from

Speaker #7: small. And we keep a

Speaker #7: keen very keen eye. I think you know us well,

Speaker #7: That's the bad news of the good news is that burden falls a lot heavier on competitors we have in this space. And quite frankly, it falls pretty high on our customers.

Speaker #4: that, there's

Speaker #4: not anything else that would be deleveraged in

Speaker #7: Tommy. We're

Speaker #7: frugal operators. And we don't

Speaker #4: our SG&A is very small. And we keep a

Speaker #7: See, we don't intend to change that.

Speaker #4: keen very keen eye. I think you know

Speaker #7: frugality approach in our business because it

Speaker #4: us well, Tommy.

Speaker #4: We're frugal operators. And we

Speaker #7: does well for our

Speaker #7: business. For instance, I'll give

Speaker #4: don't see we don't intend to change

Speaker #4: that frugality approach in our

Speaker #7: You are talking to Barry McGrath. Barry,

Speaker #7: And so we become a better value proposition because even though our costs have gone up, our costs are at a discount to any other option that's out there.

Speaker #4: business because it does well for our

Speaker #7: runs our distribution center here in

Speaker #4: business. For

Speaker #7: Winona. A few days ago. I

Speaker #4: instance, I'll give you a talking to Barry

Speaker #7: said to Barry, I know when I look out my window,

Speaker #4: McGrath. Barry runs our distribution center

Speaker #7: how many trucks I see, but nobody

Speaker #4: here in Winona. A few days

Speaker #7: else we haven't thought of Winona on a given

Max H. Tunnicliff: I said, Terry, Winona is my home. I'm like, Well, I'm going to trust you. He's like, How many routes do we have out of Winona giving FFA? He says, About 10 today, anywhere between five to 30, depending on what the week gives. I'm like, How many truck stops? We have on the road routes, probably about 470 routes when you start looking at all the replacement trucks go. We drive about 95,000 miles a week just in this one service area in the West out of Winona, Minnesota. The reality of it is, a semi tractor gets over 6 miles a gallon. You're going to spend, if the price is up 10%, 20%, 30%, even if you number, we're going to spend that much more. That's bad news.

Speaker #4: ago. I said to Barry, I know when I look out,

Speaker #7: Because so much of our industry ships small parcel. And so it actually chaotic times like this, yeah, we have to manage through the SG&A of it.

Speaker #7: Day. And he says, "Oh, depending on the date."

Speaker #4: From my window, how many trucks do I see?

Speaker #7: Anywhere from 25 to 30, depending on what day

Speaker #4: but how many routes do we have that go out of Winona

Speaker #7: of the week it is. And

Dan Florness: It actually, chaotic times like this, we have to manage through the SG&A of it, and most of that diesel that I'm talking about is actually in gross margins, not in SG&A, whereas our small fleet's in SG&A. It positions us to be more successful and bring a better value proposition to the customer.

Speaker #4: on a given day? And he says, "Oh, depending on the

Speaker #7: not so many trucks.

Speaker #4: date." Anywhere from 25 to

Speaker #7: And most of that diesel that I'm talking about is actually in gross margin, not in SG&A. Whereas our small fleets in SG&A but it positions us to be more successful and bring a better value proposition to the customer and I was in a customer meeting yesterday really productive meeting and it's a typical national account meeting where I'm talking to a large customer of ours and find out that our business could be two or three times larger.

Speaker #7: And so we have Winona routes

Speaker #4: 30, depending on what day of the week it is.

Speaker #4: And that's how many

Speaker #7: probably about 470

Speaker #7: routes, when you start looking at all the different

Speaker #4: trucks and so we have

Speaker #7: places the trucks go. And

Speaker #4: Winona routes probably about

Speaker #7: we drive about

Speaker #7: 95,000 miles a week just in.

Speaker #4: 470 routes when you start looking at all

Speaker #7: this one service area of the Midwest.

Speaker #4: the different places the trucks go.

Dan Florness: I was in a customer meeting yesterday, a really productive meeting, and it's a typical national account meeting where I'm talking to a large customer of ours and find out that our business could be two or three times larger as we turn on more opportunities. We had a lot of discussion about how we go to market, how our network works, how our trucking network works. It's a really compelling advantage when you're having that discussion.

Speaker #4: And we drive about

Speaker #7: out of Winona,

Speaker #7: Minnesota. And

Speaker #4: 95,000 miles a

Speaker #4: week just in this one service area in the

Speaker #7: the reality of it is, is

Speaker #4: Midwest out of Winona,

Speaker #7: A semi-truck gets over 7 miles per gallon.

Speaker #4: Minnesota.

Speaker #7: gallon. You're going to

Speaker #4: And the reality of it is,

Speaker #7: spend if the price is

Speaker #7: As we turn on more opportunities. But we had a lot of discussion about how we go to market, how our network works, how our trucking network works.

Speaker #4: is a semi-trucker gets over

Speaker #7: up 10%, 20%, 30%, you

Speaker #4: 7 miles per gallon.

Speaker #7: We're going to spend 30%, you pick the number.

Speaker #7: that much more. That's some

Speaker #4: You're going to spend if the price...

Speaker #7: admin. The good news

Speaker #4: is up 10%, 20%,

Speaker #7: And it's a really compelling advantage when you're having that discussion.

Speaker #7: is that

Speaker #7: burden falls a lot

Speaker #4: We're going to spend that much more. That's some

Speaker #7: heavier on competitors we have in this space. And quite frankly, it falls pretty high on our customers.

Dan L. Florness: The good news is that burden falls a lot heavier on competitors we have in the space. Frankly, it falls very high on our customers.

Speaker #4: admin. The good news

Speaker #5: Thank you both. As a follow-up, Jeff, I wanted to circle back to a comment you made regarding your priorities ahead here. One item you mentioned specifically was expanding markets globally.

Speaker #4: is

Tommy Moll: Thank you both. As a follow-up, Jeff, I wanted to circle back to a comment you made regarding your priorities ahead here. One item you mentioned specifically was expanding markets globally.

Speaker #4: that burden falls a lot

Speaker #4: heavier on

Speaker #5: You've obviously got a lot of experience ex-US with the Fentanyl business. And linking that to the comment you made today, I'm just curious for whatever thoughts you can share there.

Jeff Watts: Yeah.

Tommy Moll: You've obviously got a lot of experience ex-US with the Fastenal business.

Jeff Watts: Yep.

Tommy Moll: Linking that to the comment you made today, I'm just curious for whatever thoughts you can share there.

Speaker #7: On the future of outside of the North America?

Jeff Watts: On the future outside of North America?

Speaker #5: That's right.

Tommy Moll: That's right.

Speaker #7: Yeah. I mean, I was just actually, I was just in an Italian business last month. I mean, right now, I would say we're just in the beginning stages of exponential growth.

Jeff Watts: Yeah. Actually, I was just in an Italian business last month. Right now, I'd say we're just in the beginning stages of exponential growth. We have such a talented team. I think the focus we need to look at as a company is speeding up the transition of certain tools that we need. We were lucky with Canada and Mexico. We kind of got to piggyback on the supply chain of the United States business unit when we first got going. When we look at international, one thing when we talk about M&A or acquisitions in the future, trying to take that timeframe from we could build it in 10 years, we could buy it and have that supply chain built in two to three, four maybe, is really a focus for us moving forward.

Speaker #7: And we have such a talented team. I think the focus we need to look at as a company is speeding up the transition of certain tools that we need that we were lucky with Canada and Mexico.

Speaker #7: We kind of got to piggyback on the supply chain of the United States business unit when we first got going. We look at international.

Jeff Watts: We kind of got to piggyback on the supply chain of the United States business unit when we first got going. When we look at international, one thing when we talk about M&A or acquisitions in the future, trying to take that timeframe from we could build it in 10 years, we could buy it and have that supply chain built in two to three, four maybe, is really a focus for us moving forward.

Speaker #7: One thing when we talk about M&A or acquisitions in the future, trying to take that time frame from we could build it in 10 years.

Speaker #7: We could buy it and have that supply chain built in two to three, four maybe. It's really a focus for us moving forward. We have such a huge opportunity when we look at the tools on a global scale.

Jeff Watts: We have such a huge opportunity when we look at the tools on a global scale. I always use the example of, you have a manufacturing facility in Chicago, you have one in Romania, Italy, China. We have the same tools, the same solutions in all of the countries that we're in today, all on the same platform. In our industry today, that doesn't exist. It's just us today. Our customers want it, and they want it fast. We just need to be able to keep up with the demand. I think that's where we're at right now. We're trying to keep up with the demand from our customer base internationally. It's a good problem to have.

Speaker #7: I always use the example of if you have a manufacturing facility in Chicago, you have one in Romania, Italy, China. We have the same tools the same solutions in all of the countries that we're in today, all in the same platform.

Speaker #7: In our industry today, that doesn't exist. It's just us today. And our customers want it. They want it fast. And we just need to be able to keep up with the demand.

Speaker #7: And I think that's where we're at right now. We're trying to keep up with the demand from our customer base internationally. It's a good problem to have.

Speaker #5: Thank you, Jeff. I'll turn it back.

Tommy Moll: Thank you, Jeff. I'll turn it back.

Speaker #8: Thank you. Next question is coming from Christopher Schneider from Morgan Stanley. Your line is now live.

Operator: Thank you. Next question is coming from Chris Snyder from Morgan Stanley. Your line is now live.

Speaker #7: Thank you. I wanted to ask about just the strategy and approach to pricing. Has there been any change there? And maybe do you guys think at this point in time or even maybe going forward, it's better to prioritize volumes over price cost?

Chris Snyder: Thank you. I wanted to ask about just the strategy and approach to pricing. Has there been any change there? Maybe do you guys think at this point in time or even maybe going forward, it's better to prioritize volumes over price cost? It just seems that you guys would be able to drive higher price if you need it. Demand is improving. I think the cost of the inflation out there, I think it's very clear to everybody. You mentioned advantages on the cost to deliver. Is it a matter of hard to get it, or you just think that no, it's better to prioritize volumes? Thank you.

Speaker #7: Because it just seems that you guys would be able to drive higher price if you need it, demand is improving. I think the cost of the inflation out there, I think it's very clear to everybody.

Speaker #7: You mentioned advantages on the cost to deliver. So is it a matter of hard to get it, or are you just think that, no, it's better to prioritize volumes?

Speaker #7: Thank you. I have five things I was going to close with on this call. I think I'll use them in answering this question. And these are if Jeff asked my opinion on something, these are the five things that always guide me.

Dan Florness: I have five things I was going to close with on this call. I think I'll use them in answering this question. If Jeff asks my opinion on something, these are the five things that always guide me. The first one is, love the people that are part of this team. This is your chosen family. That means you challenge the heck out of everybody to grow their skill set. The second one is love growth. This is an accountant saying this to a sales guy. Love growth because every problem can be addressed in a simpler way if you're growing. The third one is incrementals matter, it should frustrate the heck out of you if you're not getting incrementals, especially when you're growing double digits. The fourth one is be really special.

Speaker #7: The first one is love the people that are part of this team. And because it's your chosen family. And that means you challenge the heck.

Speaker #7: I won't say the hell out of the heck out of everybody. To grow their skill set. The second one is love growth. And this is an accountant saying this to a sales guy.

Dan Florness: The second one is love growth. This is an accountant saying this to a sales guy. Love growth because every problem can be addressed in a simpler way if you're growing. The third one is incrementals matter, it should frustrate the heck out of you if you're not getting incrementals, especially when you're growing double digits. The fourth one is be really special.

Speaker #7: But love growth because it's every problem can be addressed in a simpler way if you're growing. The third one is incrementals matter. And it should frustrate the heck out of you if you're not getting incrementals, especially when you're growing double digits.

Speaker #7: The fourth one is be really special. Figure out how to be special to your customers. And then finally, getting back to your chosen family, go blue.

Dan Florness: Figure out how to be special to your customers. Finally, getting back to your chosen family, go blue. Christopher, my point of running through all that is we love growth, but right behind it is incrementals. You got to find the balance in that every day, because that balance gives you discipline throughout your organization that you're not sacrificing one for the other. Does that mean if a district manager had a customer call up right now and they had a $100,000 sale at 20% or 25%, would they take that? You're basically pushing paper. Would they take that sale? I know I would.

Speaker #7: But Christopher, my point of running through all that is we love growth, but right behind it is incrementals. So you got to find the balance in that every day because that balance gives you discipline throughout your organization.

Speaker #7: That you're not sacrificing one for the other. Does that mean if a district manager had a customer call up right now and they had $100,000 sale at 20% or 25%, would they take that?

Speaker #7: And you're basically pushing paper. Would they take that sale? I know I would. And even if that meant that hurt my incremental margin a little bit in my district.

Dan Florness: Even if that meant that hurt my incremental margin a little bit in my district, absolutely hurt my gross margin in my district, because you take those opportunities to serve your market, and your market came to you because you're special. Long term, we have incredible discipline because we want to support a great business that will have great growth prospects in ROIC deep into the future. As we grow, especially the international piece that from standpoint of outside North America, we have to be really disciplined in North America of what we're doing, because it's going to take some financial capital to support that business in the years to come. Just like 20 years ago, it took financial capital to support the coastlines of the United States.

Speaker #7: And absolutely hurt my gross margin in my district. Because you take those opportunities to serve your market. And your market came to you because you're special.

Speaker #7: But long term, we have incredible discipline because we want to support a great business that will have great growth, prospects, and ROIC deep into the future.

Speaker #7: And as we grow, especially the international piece that from a standpoint of outside North America, we have to be really disciplined in North America that we're doing because it's going to take some financial capital to support that business in the years to come.

Dan Florness: As we grow, especially the international piece that from standpoint of outside North America, we have to be really disciplined in North America of what we're doing, because it's going to take some financial capital to support that business in the years to come. Just like 20 years ago, it took financial capital to support the coastlines of the United States.

Speaker #7: Just like 20 years ago, it took financial capital to support the coastlines of the United States. I remember when California was losing money, and we were supporting it because we saw what the future was.

Dan Florness: I remember when California was losing money and we were supporting it because we saw what the future was. When we were losing money in the Southeast, up in Canada, because we saw what the future was. You need discipline to do that wherever you go.

Speaker #7: When we were losing money in the Southeast, up in Canada, because we saw what the future was. And you need discipline to do that wherever you go.

Speaker #7: Thank you. I really appreciate all that perspective. If I could follow up on it with another margin question on SG&A, is there any way to think about or maybe separate the drivers in Q2, year on year, SG&A expansion from the variable comp reset in general or sorry, variable comp in general inflation, which should remain in the model, versus fuel and freight, which could potentially ease depending on some of the Middle East resolution.

Chris Snyder: Thank you. I really appreciate all that perspective. If I could follow up on it with another margin question on SG&A. Is there any way to think about or maybe separate the drivers in Q2 year-on-year SG&A expansion from the variable comp reset in general, or sorry, variable comp and general inflation, which should remain in the model, versus fuel and freight, which could potentially ease depending on some of the Middle East resolution? I'm just trying to get a sense for how we could see that line item shift as the year goes on. Thank you.

Speaker #7: I'm just trying to get a sense for how we could see that line item shift as the year goes on. Thank you. Yeah. Christopher, we don't historically break down into that level of detail.

Dan Florness: Yeah, Christopher, we don't historically break down into that level of detail. I don't want us to think that these are massive impacts on SG&A. They're sizable. If you think about combined, if you take bonuses and transportation headwinds on the incrementals, it's a couple points. It's not nothing for sure. It's a couple points. I won't break it out further than that because these things are moving parts, and the bonus, although it's primarily heavily weighted on pre-tax, the bonus is a bit more complicated when you look across our business because, of course, some individuals and teams are a little bit more balanced between top line and pre-tax, and some are ROIC. There's not a real precise way to model it. I just give you that for context.

Speaker #7: I don't want us to think that these are massive impacts on SG&A. They're sizable, but if you think about combined, if you take bonuses and transportation headwinds on the incrementals, it's a couple of points.

Speaker #7: So it's not nothing for sure. It's a couple of points. But I won't break it out further than that because these things are moving parts and the bonus, although it's primarily heavily weighted on pre-tax, the bonuses a bit more complicated when you look across our business because of course, some individuals and teams are a little bit more balanced between top line and pre-tax and some are ROIC.

Dan Florness: I won't break it out further than that because these things are moving parts, and the bonus, although it's primarily heavily weighted on pre-tax, the bonus is a bit more complicated when you look across our business because, of course, some individuals and teams are a little bit more balanced between top line and pre-tax, and some are ROIC. There's not a real precise way to model it. I just give you that for context.

Speaker #7: So there's not a real precise way to model it. But I just give you that for context. You're looking at if you didn't have the incremental bonus, or the higher bonus as a percent, year over year of growth.

Dan Florness: You're looking at if you didn't have the incremental bonus or the higher bonus as a % year-over-year of growth, if you didn't have the inflation, you'd be looking at a couple points of incrementals.

Speaker #7: And if you didn't have the inflation, you'd be looking at a couple of points of incrementals. Thank you. I appreciate that.

Chris Snyder: Thank you. I appreciate that.

Speaker #8: Thank you. Our next question today is coming from Chris Tanker from DA Davidson. Your line is now live.

Operator: Thank you. Our next question today is coming from Chris Dankert from D.A. Davidson. Your line is now live.

Speaker #5: Hey guys. And Dan speaking of milestones, congratulations. I mean, 30 years, it's really, really impressive. I would echo the congratulations of everyone else here.

Chris Dankert: Hey, guys. Dan, speaking of milestones, congratulations. I mean, 30 years, it's really, really impressive. I would echo the congratulations of everyone else here. Thank you very much for everything.

Speaker #5: So thank you very much for everything. I guess the biggest question I've got walking away from the call today is the FTE growth has been I mean, really, really impressively constrained.

Dan Florness: Sure.

Chris Dankert: I guess the biggest question I've got walking away from the call today, the FTE growth has been really, really impressively constrained. I guess, has the formula really changed here? What kind of headcount growth do we need sort of long term? Is this an aberration? Is this kind of the new normal? Maybe just any kind of comments on what sort of energy is required to keep driving double-digit growth here.

Speaker #5: I guess has the formula really changed here? What kind of headcount growth do we need sort of long term? Is this an aberration? Is this kind of the new normal?

Speaker #5: Maybe just any kind of comments on what sort of energy is required to keep driving double-digit growth here.

Speaker #7: I'm going to definitely still trying to figure out who's taking what questions on this call. And what I'll say is I don't know if I'd use the word constrained.

Dan Florness: Jeff and I are still trying to figure out who's taking what questions on this call. What I'll say is, I don't know if I'd use the word constrained, because I don't know that we constrained it.

Speaker #7: Because I don't know that we constrained it. Our district leaders add people because they need to support business that's turning on in today and in the future.

Chris Dankert: Yeah.

Dan Florness: Our district leaders add people because they need to support business that's turning on today and in the future. Our distribution personnel do the same thing. Throughout the organization, that's true. What you're seeing is this is the natural number that's falling out based on executing in 240 business units across the planet. I'm surprised at the number. Because I figure if you can get 10% productivity gains, that's pretty good. I would've seen it closer to four or five at the field level, just based on that logic. Now keep in mind, that doesn't translate into 4% or 5% more cost because the entry level coming in, they're coming in for what they're building for the future. 4% or 5% there would be a different number.

Speaker #7: Our distribution personnel do the same thing. And throughout the organization, that's true. What you're seeing is this is the natural number that's falling out based on executing in 240 business units across the planet.

Speaker #7: And I'm surprised at the number. Because I figure if you can get 10% productivity gains, that's pretty good. And so I would have seen it closer to four or five at the field level just based on that logic.

Dan Florness: Because I figure if you can get 10% productivity gains, that's pretty good. I would've seen it closer to four or five at the field level, just based on that logic. Now keep in mind, that doesn't translate into 4% or 5% more cost because the entry level coming in, they're coming in for what they're building for the future. 4% or 5% there would be a different number.

Speaker #7: Now, keep in mind, that doesn't translate into four or five percent more cost because the entry level coming in, they're coming in at different they're coming in for what they're building for the future.

Speaker #7: So it's four or five percent there would be a different number. The other thing that's happening is, and this has been going on for a couple of years, but we're reloading the portion of our field population especially that is part-time.

Dan Florness: The other thing that's happening is, this has been going on for a couple of years, we're reloading the portion of our field population, especially, that is part-time. We do that not for a lower cost labor. We do that to build a pipeline of talent for the future. One of the reasons we can add at a slower pace right now is because if 20% of your headcount is part-time and you need to add some folks, you're adding a lot of external folks, and you're spending a lot more to make those adds, and they're not as productive right away. You actually need to add people faster, and you need to add full FTEs, one, faster.

Speaker #7: And we do that not for a lower-cost labor. We do that to build a pipeline of talent for the future. And one of the reasons we can add at a lower pace right now is because if 20% of your headcount is part-time and you need to add some folks, you're adding a lot of external folks and you're spending a lot more to make those ads.

Speaker #7: And they're not as productive right away. So you actually need to add people faster. And you need to add full FTEs one faster. If you have folks that are working for you when they're a full-time student, and they're working part-time, when they come on board and if that's closer to 30% of your workforce versus closer to 20, when they're coming on board, they're just a lot more productive.

Dan Florness: If you have folks that are working for you when they're a full-time student and they're working part-time, when they come on board, and if that's closer to 30% of your workforce versus closer to 20, when they're coming on board, they're just a lot more productive. We talk about some stuff on AI here, some of the tools we're coming up with are really stunning as far as productivity on some of the quoting aspects of what we're able to do today versus even a year ago. A lot of it is, as we reloaded our part-time ranks, we have a more productive group out of the chute when they come full time. You're seeing that. I don't know if we can grow 15% and be in low single digits forever, but I think we can do it for a little while.

Speaker #7: So we talk about some stuff on AI here. And some of the tools we're coming up with are really stunning as far as productivity on some of the quoting aspects.

Speaker #7: Of what we're able to do today versus even a year ago. But a lot of it is, as we reloaded our part-time ranks, we have a more productive group out of the chute when they come full-time.

Dan Florness: A lot of it is, as we reloaded our part-time ranks, we have a more productive group out of the chute when they come full time. You're seeing that. I don't know if we can grow 15% and be in low single digits forever, but I think we can do it for a little while.

Speaker #7: And you're seeing that. So I don't know if we can grow a 15% and be in low single digits. Forever. But I think we can do it for a little while.

Speaker #5: Yeah. I appreciate the color there, Dan. And it really is impressive leverage. So thanks for the breakdown. I guess just my follow-up, really simply, any change you kind of expectations for pricing into the back half of the year?

Chris Dankert: Yeah, I appreciate the color there, Dan, it really is impressive leverage. Thanks for the breakdown. I guess just my follow-up, really simply, any change in kind of expectations for pricing into the H2 of the year? Should we assume it's still kind of low singles, maybe even a mid-single? Just any color on pricing would be great.

Speaker #5: Should we assume it's still kind of low singles, maybe even as high as mid-singles? Just any color on pricing would be great.

Speaker #7: I think, Chris, your what you suggested is in the realm, I would say, of what we would expect. So you can also look back at stacked pricing and you can see that we added roughly a percentage point stacked coming across Q1 and Q2.

Dan Florness: I think, Chris, what you suggested is in the realm, I would say, of what we'd expect. You can also look back at stacked pricing, you can see that we added roughly a percentage point stacked coming across Q1 to Q2. Yeah, we're going to keep pushing. A lot of this is, we've said this before, we're customer-centric. Especially with our strategic accounts, we don't just push the button and ram pricing through. It's also a little bit harder to predict and commit to where we might land. We're going to look at this strategically through the continued conversations as we move forward. Anyway, your estimates are not too far off from where we probably would land. There were two things that Jeff accented on the call this morning with the regional leadership.

Speaker #7: So yeah, we're going to keep pushing. A lot of this is and we said this before, we're a customer-centric. And so we don't especially with our strategic accounts, we don't just push the button and ramp pricing through.

Dan Florness: Especially with our strategic accounts, we don't just push the button and ram pricing through. It's also a little bit harder to predict and commit to where we might land. We're going to look at this strategically through the continued conversations as we move forward. Anyway, your estimates are not too far off from where we probably would land. There were two things that Jeff accented on the call this morning with the regional leadership.

Speaker #7: So it's also a little bit harder to predict and commit to where we might land. But we're going to look at this strategically through the continued conversations.

Speaker #7: As we move forward. But anyway, your estimates are not too far off from where we probably would land.

Speaker #8: So there were two things that Jeff accented on the call this morning with the regional leadership. Traditionally, Max has a call. Our CFO has a call with all of our regional and VP group.

Dan Florness: Traditionally, Max has a call, our CFO has a call with all of our regional and VP group to just kind of explain a little bit about the earnings release and some of the things we're going to talk about. Jeff closed with a couple of things, and he pushed hard on what are you doing with your EB percentage? EB is Exclusive Brands, and it's really where we have some of our branded partners that have gotten maybe too aggressive at just pushing that button and jamming a price increase in. You push too hard, and you give somebody a reason to look at something else. Continue to look at the Exclusive Brands as a percentage of our mix. We're better at that today than we were five and 10 years ago, and we'll be better five and 10 years into the future.

Speaker #8: It just kind of explained what the a little bit about the earnings release and some of the things we're going to talk about. And Jeff closed with a couple of things.

Speaker #8: And he pushed hard on what are you doing with your EB percentage? And EB is exclusive brands. And it's really where we have some of our branded partners that have gotten maybe too aggressive at just pushing that button and jamming a price increase in.

Dan Florness: You push too hard, and you give somebody a reason to look at something else. Continue to look at the Exclusive Brands as a percentage of our mix. We're better at that today than we were five and 10 years ago, and we'll be better five and 10 years into the future.

Speaker #8: You push too hard and you give somebody a reason. To look at something else. And so continue to look at the exclusive brands as a percentage of our mix.

Speaker #8: We're better at that today than we were five and 10 years ago. And we'll be better five and 10 years into the future. And the other one was continuing to drive FMI.

Dan Florness: The other one was continuing to drive FMI, because FMI, as we continue to drive that, especially in the production world, is driving a lot of our labor efficiencies to the last question. With that, I see we're at two minutes to the hour. We're a minute to the hour. Thanks for joining the Fastenal earnings call today. Thanks for allowing me to share the story over the years, and I'm excited to see where Jeff and the team take this business in the future. Thanks, everybody.

Speaker #8: Because FMI, as we continue to drive that, especially in the production world, is driving a lot of our labor efficiencies to the last question.

Speaker #8: With that, I see we're at two minutes to the hour. We're a minute to the hour. Thanks for joining the fast-mile earnings call today.

Speaker #8: And thanks for allowing me to share the story over the years. And I'm excited to see where Jeff and the team take this business in the future.

Speaker #8: Thanks, everybody. Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Operator: Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

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