Fastenal Company

Greetings, and welcome to the Fasten All Q2 2025 Earnings Conference Call and Webcast. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. 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. We ask that you please ask one question and one follow-up, then return to the queue. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Dre Schreiber. Please go ahead, Dre.

Welcome to the Fastenal Company 2025 Second Quarter Earnings Conference Call. This call will be hosted by Dan Flournus, our Chief Executive Officer, Jeff Watts, our President and Chief Sales Officer, and Cheryl Lasowski, our Interim Chief Financial Officer, Chief Accounting Officer, and Treasurer. The call will last for up to one hour and we'll start with a general overview of our quarterly results and operations. with the remainder of the time being open for questions and answers. 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 Relation homepage, investor.fastenal.com. A replay of the webcast will be available on the website until September 1st, 2025 at midnight central time. As a reminder, today's conference call may include statements regarding the company's future plans and prospects. These statements are based on our current expectations, and we undertake no duty to update them. It is important to note that the company's actual results may differ materially from those anticipated. 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 Security 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.

Thank you and good morning, everyone. Thanks for joining us today. My name is Jeff Watts, President of CSO, and while I've listened to this call for decades and more recently sat on the call the last few quarters, this is my first time addressing you and I'm excited to kick off our second quarter update today. I'd like to begin by extending my congratulations to the Fasol team on delivering just a very strong quarter and exceeding the quarterly result of over $2 billion in revenue for the first time in our company's history. Now, it's a significant achievement, and I'd like to express my appreciation to everyone across the organization for their contributions. Now, jumping into it, sales in the second quarter increased by 8.6%, marking our highest daily growth since early 2023. And when I think about the growth this quarter, market conditions, they haven't really helped us and remain sluggish. We did get some lift from price of about 140 to 170 basis points, which Cheryl will be addressing in more detail later in the deck. But what I'm really proud of the team for is their push and momentum in market share gains and contract signings. That momentum has really built up the belief in the execution of our strategic plan, the one that we shared at our Investor Day presentation back in March. The activities and actions that we've taken better align our field and corporate teams focused on something that our late founder, Bob Kerlin, taught us, the importance of a common goal. Bob always emphasized that when everyone in a company is focused on a shared purpose, it drives unity and prevents division among groups and departments. It also drives results, and that's what we're focused on, with an emphasis on stronger, more embedded customer relationships, which reflect our strategic intent to be more than just a distributor. We're a supply chain partner, embedded at the point of use, delivering measurable value to our customers. I think this shows in our contract signings. Since implementing these changes back in the beginning of 2023, our contract growth has increased from 4% in the 22-23 timeframe to 11.2% last year and that momentum has continued as we move into 2025. In Q2, we saw 84 contracts signings well ahead of the last two quarters and honestly outperforming our expectations considering the current market conditions. Contract customer sales for the quarter increased 11% and now represents 73.2% of our revenues up from 71.2 in the previous year. And moving on to slide four and looking at our customer site performance. Starting with revenue from sites generating $10,000 or more per month, these increased 11.6% in the quarter, accompanied by a nearly 7% rise in the number of such sites. This change is primarily influenced by the growth in our onsite-like sites, or those generating $50,000 or more per month, which grew by 12.4% and showed revenue growth of 14.5%. Monthly sales per customer site increase in all customer categories, with the total sales per site increasing by 17.7%. to $6,790 per month. We did see a decline in the number of accounts that are under 5K, which did contribute to the average increase in revenue per site in this category. But when digging further, almost all these declines were in the under 500 customers, with the bulk actually coming from the customers that do less than $100 per month. Now this decline was expected as we continue to drive our focus on our larger sites, but we also looked to relaunch Fastenal.com later in 25, and this is being done to really help address a spot by needs of all of our customers, including the ones in the smaller categories. Our goal has always been the same. Our goal is to grow in all of our categories. One number that does stand out to me in our growth is the non-manufacturing sites in the 50K plus category. Now, this group's revenue has increased 30% year over year, and the site count has increased over 18%. Now, this is, we believe, as a result of our realignment of our sales teams to work more closely with the regions and the RVPs, from the government teams to the safety teams We're driving more business together in areas we may have missed in the past, especially in the non-manufacturing sector. And again, some encouraging numbers. When you look at the slide and the results on slide four, we use these to gauge our quarterly performance, but in the field, we go down to the month. And what's exciting is when we look at our trends on a more granular basis. As we move throughout the quarter, growth has continued to increase in all categories, 5,000 and above, most notably our site counts, which were all double-digit growth in June. Some very exciting numbers there. Overall for the Gorder, a very nice job from the team, not only on the sales side, but also on how we're continuing to show progress on implementing our strategy across the organization. So again, to the team, thank you very much, and I'll now pass it over to Dan. Thanks, Jeff, and good morning, everybody.