Fastenal Company

Welcome to Fastenal's 2026 Third Quarter Earnings Results Conference Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone today should require operator assistance, please press star zero from your telephone keypad. Please note that today's conference is being recorded. At this time, I'll now turn the conference over to Dray Schreiber. Thank you, Dray. You may begin.

Welcome to the Fastenal Company 2026 Third Quarter Earnings Conference Call. This call will be hosted by Jeff Watts, our President and Chief Executive Officer, and Max Tunnicliff, our Chief Financial Officer. The call 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 December 1st, 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, Dray. Good morning, everyone, and welcome to Fastenal's third quarter 2026 earnings call. I'm Jeff Watts, Fastenal's Chief Executive Officer, and I appreciate you joining us all today. Also with me this morning is Max Tunnicliff, our Chief Financial Officer. Before we get into the quarter, I would like to recognize our blue team. Every result we report today was earned by people in our branches, our onsites, our distribution centers, our trucks, and our support teams. They show up every day for our customers. They solve problems, and they keep finding better ways to help our customers run their operations. So to the blue team, thank you. This was a very strong quarter and one you should all be very proud of. Now, two quick housekeeping items before we get to the numbers. First, our slides look different this quarter. We've refreshed the format of the investor presentation to make the story easier to follow. The flow now goes from highlights to our objectives to what drove sales, financial results, and then some key takeaways. I want to be clear about what we didn't change. Our definitions are the same and our historical data is the same. The supporting detail you relied on is all still there. The sum of it is simply moved to the appendix. The first page of the appendix shows exactly what moved and where to find it. And second, we're targeting a 45-minute call today. We expect to keep the Q&A portion broadly consistent, take about the same number of questions as usual. Now onto the quarter. And for me, I think the headline's pretty simple. Sales grew 15.5%, earnings grew faster than sales. Our net sales were $2.46 billion, up $330 million from last year. Operating margin was 21.5, up 90 basis points, and our return on invested capital reached 32.5, up 230 basis points. Operating income increased by $90 million from last year. That's the largest year-over-year increase in a single quarter in Fastenal's history. But I think the three things that really stood out to me or stand out to me and drove the quarter, first, growth accelerated. Now second, we converted that growth into higher operating margin and faster earnings growth. And third, the quarter was driven mainly by market share gains through our key account strategy and new contract wins. Now on to slide five, and this really brings us back to our three strategic objectives. Now these are the same pillars we've discussed before, and everything we do ties back to them. Now first being the increasing sales effectiveness. We're gaining share with larger customers through our key account strategy and new contract wins. and you can see that in our daily sales growth and in the growth of our largest customer sites. On the services, we continue to grow our FMI installed base. Our fast bin and fast bend technology, our digital footprint, now these tools improve the customer experience, they strengthen retention and make both our customers and our own operations much more efficient. And then lastly, expanding our TAM. and we continue to reach revenue that we serve today through new products, new geographies, new business models and new services. You can follow our international and non-fastener growth in our monthly sales releases and really the strategy is consistent. What changes quarter to quarter is the evidence and this quarter I believe the evidence was strong. Now on to slide six and what really drove our sales. Our customer site data continues to show progress with our larger customers, both new and existing, all growing with us. Our contract count increased 6.4% from last year, with signings weighted toward multi-site national accounts. The number of sites spending $50K or more per month with us grew almost 19%, from approximately $2,800 to roughly $3,300, and sales from those sites increased roughly 28%. Contract customers now represent over 76% of sales and their daily sales grew 18.8%. Pricing did contribute for the quarter approximately 2.4% to growth. That's a slower pace than earlier in the year because the year-over-year pricing contribution peaked between fourth quarter of 25 and first quarter of 26. We're now lapping some of the strongest pricing actions taken in 25. Marketing conditions did improve in the first half and that improvement continued in the third quarter, but our growth exceeded the growth rates in the industrial markets that we serve. To me, that's the clearest signal that we're taking share. Now on to slide seven, our digital footprint was 61.4% of sales and digital sales grew approximately 16% on a daily basis, faster than the company overall. When customers transact digitally, orders are more accurate, there's less manual work on both sides and the relationship becomes much more integrated. We signed approximately 7,500 weighted FMI devices in the quarter or about 117 per day compared with 110 per day last year. In our install base, past 143,000 units, up 7% and sales through FastBin and FastBend grew approximately 18%. We continue to expect 27,000 to 29,000 weighted device signings for the full year. We really believe that that opportunity for us is clear. We need to keep moving customers toward technology-enabled replenishment because it improves service, it strengthens a relationship, and it creates efficiency for both sides. Now on to slide eight, and this is a little different from the past, but from time to time we'll show you a real example of how we win because I think it tells our story better than any statistic ever could. So today I want to take a couple of minutes to highlight our customer strategy in action and show how we identify a customer challenge and bring our supply chain capabilities to life. In this example, we had a new customer that was experiencing direct material stock outs, supply chain shortages, and limited control over product consumption. As their business grew, those challenges became even more significant. So after we signed the contract, we got to work. You know, our Lean Six Sigma specialist They mapped the process, identified the root cause, which was a manual inconsistent system with limited automation, limited digital visibility, and physical organization. From there, we continued, we developed a roadmap to modernize their supply chain, and once approved, our team moved quickly. As you can see on slide nine, we reorganized their crib and storage areas for the direct materials. We installed clearly labeled barcoded bins, deployed our FMI technology, established planograms and connected the customer to Fast360 to really provide greater visibility across their facility. We also established KPIs to measure ongoing performance. And the results are significant. Digital visibility increased from 0% to 99%. Replenishment is now automated. Stockouts have been eliminated. Inventory has been reduced. And employees spend less time searching and walking for product. Over time, we expect the solution to generate anywhere between 25% to 30% in overall cost savings. But I do want to emphasize that this is only the beginning. As we learn more about their operation and deepen the relationship, our local teams and industry specialists are going to continue to bring new products, new technology, new systems, and saving opportunities to the customer. Now, that's the power of our model. The initial investment creates value, that value builds trust, and that trust creates opportunities to expand the relationship. Over time, those benefits compound for not only the customer, but for Fastenal as well. With that, I'll turn over to Max to walk through the financial results.