Fastenal Company

Greetings, and 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 1 and your telephone keypad, and we ask you to 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 0. It's now my pleasure to turn the call over to Dre Schreiber. Please go ahead, Dre.

Welcome to the Fastenal Company 2026 Second Quarter 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 Tunnicliff, our Chief Financial Officer. The call will last for up to one hour and we'll start with a general overview of our quarterly results and operations with the remainder of the time being open for questions and answers. 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 September 1, 2026 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 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.

Thank you. Good morning, everyone. Welcome to Fastenal's second quarter of 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. And Dan joined Fastenal, 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 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. So 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. 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. So moving to our results, Q2 is 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. So turning to slide three. Now on the top line, daily sales grew 14.7% in the quarter, extending the pathway we built in Q1. 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. And 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. 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. Now, on pricing, and we realized 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, it's simply lapping the onset of pricing actions we took in Q2 of last year. Our pricing actions to mitigate costs and tariff inflation continue and our pricing discipline continues right alongside them. I know Max is gonna touch a little deeper on this later in the deck. So now one number I want you to focus on this quarter it's the customer site that on the right side of the slide. And 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 16 and a half percent over last year with revenues growing over 26%. Now 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 assigned to produce It's the foundation of the momentum we're using to carry into the second half of this year. And that momentum is being reinforced and scaled by our technology platform. So moving to slide four, which is our technology update, and 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 represent 61.6% of total sales, up 60 base points from last year. 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. 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. And 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. Now, turning to FMI, the engine of our services strategy. FMI technology signings were up 8.3%, 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. 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. Now 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. And with that, I'll turn it over to Max.