Fastenal (FAST) 13 Jul 232023 Q2 Earnings call transcript

Good morning and welcome to Fastenal 2023 Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

At this time, I would now like to hand the call over to Taylor Ranta of Fastenal Company. Thank you.

You may begin.

Company quarter Fastenal conference the to XXXX earnings second call. Welcome Officer. Dan will Holden President Financial be call Florness, Lewis, hosted Chief and This Officer; by our Executive and our Chief

transmission X Fastenal. proprietary simulcast The and conference hour reproduction, today's by Fastenal general call Time. being answers. is Internet of XXXX results recording, available of A distribution or Today's call be the call the quarterly Fastenal the will investor.fastenal.com. call on is operations, our permitted for recorded open the of X, This will up at time consent. website overview replay midnight and is start without webcast being presentation with September of Investor last via on Central and will Fastenal No Relations a homepage, with being remainder the and is the audio to the until for questions

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

I call to would over Dan Mr. like now Florness. the to turn

thank and our call. morning, quarter you second for everybody earnings Good

opportunity. the role Financial I back joining message. I'd in share stepped unique in that the Fastenal my When Officer, offered joined on into things start matters, was Fastenal a I to me Kierlin Chief the that Before XXXX, Bob of one of is I like

joined the in way branch an and didn't so, in distribution that And I a organization. my up in unconventional or through start way in center I a work

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nicest One [ph] I of have wonderful to were to as loss and and lady well And a this children her my to her. Colleen know started we earlier Bob you XX. year. on lost we grandchildren, condolences the What back of met your ladies and ever in and all blessed as We sister. the

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move I'll quarter. that, Fastenal on With the onto

planning discussions -- warned or had December, our to XXXX, we ISM cautioned We slugging some leadership Last Second for fall, is knew challenging aspects that we our quarter. it. quarter last meetings going a weakened. when to XXXX when the team. We had we our was -- have and 'XX

there's to from been really We'll and be prepare stuff, will teams prepare and something it's to tough expenses there's that muscle well. way We're noise, our and to because slowing get a Second number number and your and for an prepare that standpoint of get memory our going of skewed years all between the experienced interesting on tariffs chains quarter experience have have noise. years third COVID means to and quarter the keep back. economy inflation and and and -- a have been all of that's going congested the we to through supply yourself, right manage heads noise, for quarters this what we're

But it was a challenging quarter.

Our earnings came rising X.X%. at in about $X.XX,

decelerate. growth an led important We X.X% grew not activity data did leverage. to our That's quarter. in manufacturing We Softer second element the business. our sales of

Our cycling some touch little X.X% grew Holden, detail. on changes mix sales and but a we're as more through

costs earnings. Our combination gross real math a anticipate one variable much quite And needed X.X% did that expenses X.X% softening if didn't about little leverage as profit quickly I'm lower. dollars adjust and you not operating be I grew and want of not We didn't the elements X.X% enough. it bit that's good and is, but as to with grew quite know we our to it a our good your

have is in X organization, As good tax cash and profitable the of given weakening a economy role to really a our States, working it a frames and capital when grow, influence typically And us our time pay balance as generate quarter seen ability ability our of for CFO, the you lot second payments. we prior old a painful amount is sheet tax. lot the high business on because when to can in of you're affects we've United quarter operate my you

But generate having generated And to -- will operating we we recall quarter But cash earnings strong don't cash we've so a I really us ever more operating normally, than an as maybe second hard. us where second earnings, quarter seen ever XXXX. perhaps -- $X.XX for for was we flow and of Holden -- hits dollar cite we example flow. where that's every time cash year. $X.XX flow a in it And this did. cash in

it XX If ahead to XX when economy were We're back North an just And need congested, will supply period. we the not message supply the was on, we of that America an for don't partner, and ports years is getting in customer made of need customers is this of everything support a the let business, fund teams, and inventory and were worded beefed it to I XX, our supply days and with economy We capital in working folks we getting not chain. doing getting receivables covenant inventory, clear extra what's chunk supply on very have the And growth. yourself our from -- quarter. extra turning fund that it our needed the inventory. We have started is were to congested, the but Coast a in last the means we down the first really inventory congested, get we to extra our to chain chains West chain our of that the several harvesting -- we that. were happening their In also up and it as quarter. doing and

now has think where in inventory. to team at I sheet the and we say, have look means wonderful It it job. capacity our strategic does make sense balance done to investments a make

saying can were table it that think our ago on but discussion right years all focusing couldn't energy had, X stuff really and there's not something the because even a now whereas on be year we of about I'm ago, we else.

quarter, In we some second the leadership changes. made

a XXXX were handful back Watts, just for who in Jeff in Canadian international he's And started in joined to Ontario. Fastenal years well. oversee U.S. we locations obviously, he of all the been team really in XX across sales who's is of had so team no years. XX-year and them when off, a The other XXXX, our -- our led and He's we U.S. international knows he's organization here our -- team efforts efforts the sales will stranger planet. quite -- a we since each well led led know really when few the because First that our international for But employees.

see. So approach And to business has we greater coordination and how have very welcome and success going entrepreneurial he's forward well other we'll know believe to he but leads each our a I him on efforts. the look Jeff I a to

an formalized Owen, that announced who's I role role, and been team And error I June been here XXXX. added he life. know Officer. and Operations was in Terry I since the out I'd is of kind the that the Terry it in aspects if know I not But material let this we it's in late it in Chief thought And found in XX math, as it's there's I process. years you do has Operating probably yesterday And our XX. our joined mention this had release. a should EVP this true of quarter. I we and bullet of he's think this

long-term last in labor an and sorry, our didn't improve ability excellent a to our that error this factors conclusion, steps years, But believe foundation I So the several inventory aside, taken we've lot in generate the marketplace. gains productivity. to our catch And forms our both share in of cyclical for process. we

the state obvious. I'll next a the number. Onsite to page. disappointing Switching Onsites, XX is

when to to per being really sign of impaired XXX has to you per folks about to XXX because Our a and to drive and inside we our our aspect to that Onsites to come internally. around the that along, year. XXX XXXX in operate ability to bunch quarter, year. you in worried thing been was from That's a been XXX X XX When came of you're COVID Prior to it XXX is hit last COVID, XXX stated Blueshirt XXX ramp-up aspiration internally want per people mentioned your walls. inviting

dramatically. drop we saw that so And

to have way or Perhaps are year. some did adjusted XXXs. We Onsites But our need we in year, broke that distraction, That's XXX the we've we're leadership to in now, year our number of probably made similar we great recovered think should a We're the we changes Onsites we'll be. to. more. number. just last quarters. that the XXX And ago. We the out a with more a that said, perhaps in up, fact needs days focused last year to not last about X we the as we of somewhere the not pipeline right created XXX number. some building -- XX as than be We And XX% come signings

different FMI story. that's a Technology,

Onsite quarter. is So, a XXX our goal in

conceding tells so of the believe marketplace. I us. to illuminate a to us the locations then new a huge ahead great XXX first. day. positive. to gains. chain far partner. I'm Same for is take fourth customer And quarter, did going That's the XXX a quarter to share XXX And how market I'm second me, say quarter, that's us and day. in get it's out per flags our let's Let's supply chain is because out excuse figure the marketplace me with the I and but new wrong That's improve it pleased but Maybe -- we out supply we planting in for XXX on the a customer, supply it our chain it that to we it's not there technology, and space are get FMI believe XXX, being the XXX

Year-to-date, I'm we're year-to-date. our FMI quarter. XXX at through the group the XXX Board at XX.X% with yesterday I sales there. we I this told this actually in really our our yesterday, doing XX quarter, misspoke, but quarter, with we're the of meeting XXX the had with is went And platform pleased what the Board second we're

New XX% in flash, it June. was

the hit we XX%. -- number So we hit

and but there. Now to we XX% progress see need continue XX% to to get really nice

handsomely XX% and grow for in the to continues E-commerce quarter. about grew us

this been e-commerce because spend. a of planned other is a different journey us, For things has lot than on

stuff lot that's about it a you're stuff month business makes daily, If your you're of in stage that about and all That's sense to using Technology, FMI spend. to every you accordingly. is having think on weekly, order. our E-commerce, that it plan

us. it Historically, XX% and I'm It's, be unplanned. that's The a I is business. it's a growing piece pleased to mentioned, for say to typically customers. of strong as larger XX%. it's our And of up EDI portion suit So not bigger

role, at sales can billion, be. the were into $X.X company But I the it great XX%. was not of web again, the The and magnitude with of or then. of at piece less portion when we and X% XXXX, billion back of $X.X that how up web give portion that's can that's it in stepped small said, you we of than this and this And to business large but changed be a almost we're of

$XX sales back going So million about through in XXXX. web

In XXXX of was in X.X% the it sales. second quarter,

billion. right So about on we're a run $X.X now, XX-month rate of

that's business $XXX and that not good at we're but we a be. that's So million can approaching it

What the was ago. a of last X.Xx really few bigger accelerated it And example. years, so people handful working do it's by some obviously, the COVID as a people are been And years -- it's events of is remotely. accelerated perfect than

every Some day. getting stuff people a are that it more electronically. numbers seeing ordering in lot We're at and better our we're

together XX%. XX.X% e-commerce thought and technology We've And We I conversions. the XX% agree think you and sales with you in was when second to about there get it know XX.X% of language to footprint, don't we our the 'XX, I a FASTStock year FMI digital could was quarter push that year. completely ago. about the our tweaked if this of

I it every more example, think case of lot is areas, activity, doing because It's it's of transactions But production MRO the installs. going the FASTStock, day. in the going production fastener really into we're some for we're going part it's more of and -- more the doing day. every into of OEM a and is

little smaller our slowing is production bit business. a industrial are transactions down because the in However,

And so orders. we might be doing more

XX,XXX which our you we them. just And did cite I'll FASTStock, day. orders January our is of tool statistics. are of fewer few scans of There a XXX,XXX every XXXX, In through

with an every scanning out XX,XXX in and And generating and June, device year, in Android yellow per gains a going $XXX and to with our this device and between of day it's going instead and scans to XXX. are bins. January So had conversion market Android January out closer then note of a -- about XX,XXX. day we're scanning of that with XX,XXX order. planograms going XX,XXX pad, XX,XXX grown a That's an share combination of employees out that Actually, now is

our a share. that's ability from win huge system in huge to take efficiency. It's so a a And of standpoint from win market

that And looking had $XXX. was our to size the average in numbers, order But January, in $XXX calendar dropped at XXXX. number

And And Between enough so of June, because primarily bit you're about in transactions more a it's not industrial there's that's I element $XXX June probably tone X.X%. is when fasteners than about in dropped on economy the order X.X%. So an the be January between there think $XXX, because it's but and XXX,XXX there activity down thing. a going of down that, that's marketplace. activity. about might was there anything it and a it's else a month, $XX mixed declining some of That's deflation January the mostly there's little doing which

I'd And to Southern some and tool, in the share fall bugs and we excuse it the the I through weeds. planned XXXX. before accelerated FASTStock that out last some and bugs, June and In XXXX, of get to in California to summer start we I work again, that And that share out it version we it device we started thought beta out Just one through Android turn this X-year have late the Holden. thing those a over by the and of me, rollout. will October is, of out a rolling that company work rollout in there. device rolled -- this of regions in COVID-hit across year with did

about we had X our in rolled X-year today, XX% And -- we revenue. So, a rollout that's months. of

same -- we year, October on capability plan customer device to what which -- and I right visiting we've the on by an and XXXX. do The It something to take can use of pad device. customer, plan frame. only them. October expect That's to personnel have a out order, all order year essentially, this If can we customer for a never a I be I the QX. of a it we have roll for this to goal could end our to not in will the of they're easily for or be I time asking in search recurring a out our front had that call take And internal-facing our and respond can it would in we -- in goes in roll will it the well, when be out a it's beta for tool

internal A second external-facing facing also developed beta right now. app. piece, called that's an customers We've it's with an app FASTScan,

stock app a that goal If a bin download primarily store might be out for Our the that would It's customers. be stock transmit customers in customers. for it and do the coming supply be, customers orders for out we for out Western themselves, hours have where few visit, in August. is better stock will surprised or Canada, so by makes bin and choose Google the Montana in to facility chain aren't a that August that can Play we Apple some and customer base. from smaller they in again, that a scans they to or That in when a

in and be of And but depending of the customer-facing the not business. goal that's that's we're better billion to building great our to now with we at we in on on reaction out because would our roll what be do within habits portion a think next success It's the Fastenal as that we -- some our web can Again, well. pad, a we $X.X the order business to app going find the summer tools we're marketplace. that buying

With that, I'll turn it over to Holden.

bit. there was One thread of Dan. second to quarter Thanks, of It XXXX. loose actually level. the a Great. pull Last in we had conversion perhaps this cash time little

of don't of produced as there we For point. at the quarter It payments, it once-a-century XXXX, the that cash reinforces tax pandemic. now that create despite those who second remember an occurring several event to But a I the took second environment. really the event time Again, quarter looking know quarter was a like think range. to the are there XXX% that not managing where of do post-pandemic the fact thankfully, teams our that anything in kind in in a the been success to And gets conversion think really teams able has a I that pandemic. remotely the

of but sort. a condition take does it So yes that

of production. meaningful business in and sub-XX our Since in XXXX. of March, change the most flat sales Jumping string sales XXXX investment XX.X% to the be This February to on sustained in Daily May manufacturing culminated daily spend PMIs sequentials growth impact despite in we quarter significant X account change we that of increased within have sales has occurred This of in the weaker the details plan which a had experience Onsite greater manufacturing. that key grew segment trend we moderate Slide long deck. the from year. industrial of this and on sequential negative into customer. X.X%. overall up so, seen of in activity did June Even second the in which The represents tends X.X% macro-driven and our strong reflects focus to June from period

XXX in the surprise to basis XXXX. the As approximately and trend declining in from to growth points of period, they basis of is a first points not relates quarter it XXX continue pricing, and the second to second basis XXXX. XXX from likely the This contributed quarter of XXX will points approximately XXXX half

the quarters, in specifically weakness customers, rest large factors market factors end Other areas in dynamics our quarter some and of construction of were unchanged largely retailer but prior remain cited growth geography in in current world recent our from these around the contraction lack among periods.

pursue to less where amount currently asset transactional disproportionate has labor continue account had shift a are market we believe putting spend plan this emphasis. this we of efficiency. key outgrowth, better leverage better We historically and spend construction, While to in smaller manufacturing contributes

as scrutiny We slower have operating in to leadership of Regional weak last over capital of continues greater mention months. customer or orders. the sentiment sequentials some X X experienced deferred manufacturing-driven and and cautious spending with characterize

visibility outlook pointing soft. immediate forward to to most be indicators limited have the seem remaining we usual, As but

almost down XXXX growth down of as basis customer entirely Now experienced sales over non-fasteners fasteners operating of from This points over to XX%. XX.X% non-Onsite mix prior was the the XXX of is due and margin in Gross prior growth. Onsite year. The in widening second XX%, incremental Slide outperformance in XX.X%, was and we product growth to year. X. the decline was Operating margin margin quarter

period were favorable organizational shipping GAAP captive from benefits our imported caused relative gross reduced that products, margin, activities The the second expenses P&L. The revenues more XXXX. gross predictable or use price cost smoother by external balance supply good fleet, expenses. record costs. was sheet and fuel immaterial the to freight was reduced the the allowed to higher shipping of year offset and of providers, prior from quarter higher of be period Freight of of to impact relieved ago for margin lower reflecting of a leverage of cost to purchasing stemming in freight freight Reductions and chain

was basis was On offset decline of fully points the sufficient payroll we compensation expenses. experienced record we due by of to related XX This and margin. incentive offset occupancy modest of leverage of last not basis which operating expense was points This which in deleveraging costs lower level. side, year's both other which was produced leverage gross of the expenses, to entirely XX to

margin playing distinct out operating of quarter XXXX. were elements There in the in X second our

aggressive the reductions is to convergence difficult of second GAAP anywhere impact to alluded basis magnitude of alone I shortening repeat is XX same near cycles. negative This by product in had First, GAAP expenses XXXX. a inventory the The order point half expenses. and and the comparison, a unlikely the

represent as cost the expenses of certain such FMI Second, business, for investments slower and planned growth environment. growth IT growth XX% sales by is which magnified devices impact our and the XX% in in spending prudent in

lower that spending macro together, XXXX digits. headcount incentive second quarter in Third, the double have while would slower I appreciably the Team supplies, environment EPS XXXX. compensation exceeds did and Putting all Also, from this growth. second of the up the $X.XX to expect variable quarter of not meals, in in us we third to we to growth hours continue leverage second the quickly produced in reported for part-time cost the Blue quarter spending with enough increasing travel, everything X.X% $X.XX, tighten adjust sales of quarter, XXXX.

in the XX% second a conversion in quarters of net rate second Traditionally, normal range. or XX% in XXX% We period. million operating Turning to quarter the the to Slide income X. approximately in $XXX of generated XXXX cash have

X.X% debt the prior us strong relating with reduction in to total of at is period. this versus a So ending This the a cash working of reduce cash capital to performance debt use allowed for in quarter quarter XXXX down of of first in capital first the in apologize, second I XX.X% XX.X% XXXX, and of XXXX. XX.X% quarter of -- from quarter the from in second the XXXX the

a growth was is receivable being terms a improvements that stock XXXX likely It tracking improved up by XXXX. Inventories not bottlenecks. function X.X%, of impact seen our branches normalized in retail to manage supply of receivables degree, processes. us offset likely fell tend from larger our growth to and built unwind which though since That reflects to customers period's accounts faster lesser longer inventory will continue, the inventory on chains, a Year-over-year due layers product had level with XXXX and quality. days hand improved up mix throughout of of This XXX.X, process which allowing is a velocity also late notable sales that to have to in in early internal to reduction X%. XXXX stocking largely fell network, we through

We flexibility this have significant in strategic point. inventory at

equipment. to will on $XXX retained our same capital spending fleet the investments, suggest $XXX time, low million for related have range. that spending certain the of in and higher capital have deferred IT reflecting end of projects the to slowing demand range million, spending our XXXX hub net at At be equipment We we

of The was obviously quarter XXXX challenging. second

months will influence have cost XXXX. half costs better end in tightly we have to our of next market profitability. X second that control over comparisons the we and Obviously, Whatever direction that control expect over can demand. more to We affect those little takes the

our issues shorter-term structural improvements business. cloud shouldn't these However, the to

and the flexibility saw our particularly our record investor outgrow on improvement stabilizes capital, as some strategic they productivity believe return to of quarter the cycle we We significant on in inventory create market, positioned and in presentation. are X reflected industrial strongly the as labor Page second The improves. further

to we'll over With turn begin it the Q&A. operator, that,

Instructions] Manthey Our the [Operator from line of David questions first come with Baird.

I summer. Holden, a hope great you guys Dan, having are

I'm you Holden, So X one about contribution, 'XX. talking a and question. on clarification Clarification, Slide said this second have when you're you're half in and second, will hoping continue to update KPIs can then price you're the of I the then on first. And you the And initiatives. your to wondering Focus us I'm and question, CFCs what there, [ph] relative X referring

contribution clarification a expect Does in that the continuation The of moderation half, continue we've just is in Sure. what the price quarters. past really from we the over been to help? seeing few overall back

Yes.

if CFC growth to yes, business the or you continues in experience current in quarter strong hunter to those year, I program in -- books our you books XX%. of CFC the about the did actually north the books second quarter, very Then the believe Okay. what it's the has, prior -- think of that relative if growth. up those

So, we the specific have the you, to don't good And own particular target. X have program. success I CFC CFCs in on extent, target with continue their some see for numbers Dave. to

of think in of CFCs our into key approach a So yes. are The target of the growth on occurring. business. manifestation well the you same think And is sense -- are the the I excess can get But feed have I a grow that that I don't specific well. how to target account Xs as X. CFCs continue

line Hoffman of come Michael with Our the questions next from Stifel.

limited data you're that forward generously, trend think I visibility you can hitting do have that Dan and Holden, share the you you get -- but again, bottom? you so

market very just reinforce, going to I we guess is I'll have what little to hold. visibility the

the what as Here's a I've indicator PMI look it levels. of to I'll say. months. future has always respected I X tend to X an of forward think activity

going that know would which was the our message gave all that, And is the to soft. June meaningful not that I new we low internally back this remain we think year people is a think to the to in PMI I that a suggest low that seem nonetheless. but new of hit XX half

what's the don't I is relatively PMI back real have and half suggesting the insight any an remains we indicator going to good September, But PMI be our weak and sort August, been give a in into has internally of. always what you the So low take off indicator would that's to and that happen going October. cues of

wallet of of Okay. influencing as of and think things you tend that you the you over the And that cycle to of individual of a characterize share where transformation, that's you the understand how do gain. I the how percentage digital some I penetration, how life customer on -- would gain that in the then journey correctly, one greater are

I platforms think of -- that talk so ways and existing of about And business. converting is our customers it us for digital the to FMI we've customers business. -- efficiency internally, isn't engage number marketplace. free It's It can think with if time nice. XX% the you about brings which good in is at the is of that think our XX%. the in sake chunk I'll to new about historically you to foot we the the A that footprint. It's about insights the efficiency we always up get it well, just allows the about the to couldn't. efficiency's component talked And share digital to

we grow ultimately, so means a as to time And business because the see that engage more. faster you up can freed

separator business with bring an customers meet program And bunch it's where of they national -- the is, with embedded a customer our each system of -- account speaking And in and -- and the within with different other our chip. a -- of explaining and RFID When I they The was a of in summer the a discussion is essentially meet RFID piece worked. a marketplace. have because how the tools customer that's how from to purchasing said team suppliers, we business. person compound locations There the conglomerate last winning we capabilities. thousands are a engage spring in event we the were

things And be So problems. top what unbelievable. top manufacturing on in to she and they walk all see a a people ample the the be a look having bulb off It I'm And questions. placed works. "This shelf. and sees bin okay, hungry, that asked what this [ph]", is bin where is solve of about to a room said, empty, that XX across realize person is at it, This would few that and And simple that's The different light clarifying somebody is around said, and stuff thing about "You she looked pops she oh, is. response how to when empty, remember She instead And lot need RFID talked the check our the needs shelf a replenished, to bin said, replenishment I issue" and her person she plants is has struggled. reader. of fed. learned X that's find this when

like And a you employee an out "Hey, said, love chip". go X day going said credit little pulled RFID the [ph] weeks I'm said, to show a using visiting and was And he replenishment. as it above They're the just wallet, using that?" "That's how ways showed I to XX my I he "What's me in something service. size he ago, konbond and we're he and it you're I'm a and down he the to". And years to, spend for card celebrating in of I system. going the and down in customer drove pallet with them for beyond visit Illinois to with thank said, you them XX "I'd employees customer his of want me" years,

to in our they the in And it tells us. and pallet [ph] have need Not on pallet the and it incredibly konbond efficient it's customer little a to over. bring a grab matter there. in it. We bin loves of on and they to our with of you down only you when another little plastic done then card branch, just need call but and the have another product. they showed rack little system this come card more customer bring is need folks that realize or you throw to because up RFID they one tell this that to tomorrow guys a He So seconds. wait The one it it envelope top me. check for they stuff and Fastenal says, over for it's don't we love chip, another you write The

that supply at like separator. other separator, facility because a that RFQ and they tour that's in they're does stuff partner when That's just a something winning we're the is and is spend. great process, And when see a vending chain and that customers like us plan come business

Sorry, I I helpful use long examples. think it's went a some little but there to

the operations actually actually flexibility more I contributes extent helps in it and share marketplace in that think to it more bidding to as of than to the as the that those sense cost our add And I our might makes that overall in well market reduce gain that us that does, to interconnect I allows think us competitive processes well. win ability and and X

So to ability as ability to it as really both well plays -- our it plays our really strongly grow. in leverage

And us be XXXX. to a an and was most the I to folks and might to for staffing before. better it a and day a I I up want Onsite could the us XX branch you'd group a President. typically with hours and asked it Regional February, really XXXX. down instead was is was in they because customer they a hours it, easier if on service and would our hours year visiting, handful to was we have visiting And that put could there. of the and of need a speaking put our we -- And staff XX ramp lockers to February, you In up wrong up believe studied believe, a the incumbent wouldn't day. and challenging. of, work me a we They've customer Randy been service be we'd in in a set handful in were Vice had faster large if way And contacted but we in we you took we senior some I managers product do out me of sometimes get activity I Onsite. the that if business than Miller, XX give our think XX better fall the visit go Indiana And was a it the it Onsite said, help -- and better I getting of recruit finding day folks

about a challenging. instance. were loved during was me And of in that it them. when daylight hours And customer, folks less that great or the just us a visited visit a I case our it's were we that with Finding they some showing especially model. I again, stuff they that doing had work And XX a to XX-hour day is window, of -- that separated

Our Loop with Chris next questions Markets. Dankert from come of the line Capital

mid-teens growth in Holden, you and spend FMI had of IT an investment. a kind

about half would of investing can kind thinking back keep growth and kind sense of we're the kind SG&A investment how As as you for of forward, in of going year you trend you here? spending a give for us the

part less about investments our IT those that XX% we making in spend hours business making there's think Yes. and using don't FMI the we're investments our in we X%. as treating revenues to that and our there. an I are things we And that wise a necessarily how Well, among about where that the because in I we're growing lines make. we're timers are are are need the those meaningfully to environment and mentioned talked investments And expense part anticipate going are expenses. those back we're and were than that travel, message get really expenses for of that is a we though more that had number where related weren't type in sales in that we up, areas we're both When The that's areas those do at in about we June timers to areas. to had marketplace the with variable fact non-sales just X%, talking up pull

impact that? of what the Now was

that about hours, of base higher from -- absolute if the our impact. business margin. about that I point think increase impact meals, part-time supplies, That If in basis headcount I that's If about would a et in think have I profit cetera, travel, sorts of higher to overall XX terms on think the about been from XXX impact point those pay comes things. comes basis about a the

offset And compensation was strong this tighten to expect year the that of we're third was year. up incentive such that areas to because the environment the behavior we'll last on an fact lot a was to relative that down that need by more in are But we as those a reflect quarter. of that in. Now year patterns that our organization, make I progress and again,

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that. continue and we'll investment I a wise think it's

Blair. with come questions Ryan from of the next line Our Merkel William

I couple of questions margins. on had a

Is So XQ first off, of year. think seasonality, should and right XQ? How on gross for about framework rest the normal we margin. the the

modest XX but typically I XQ second a And points being XX basis of think I was talked first fairly basis and it the of usually is sort reasonable muted I a still normal quarter down right? would your about XQ in mean from first I be of again, ballpark. down bit still at is the one, quarter. is, that and fasteners I open apply that mix little sort saw quarter mean, that's I and appropriate. weak of think seasonality more gross an typically with and I mix more that. is a XQ think from a you've that's we Because impact than the seen to think question weaken XQ. maybe margin than points in quarter, flat down about about XX. about rate more think winds would expect. in And just reality as you And the this bit you on a a up having past. bigger normally cycle,

to of and well, if happen Ryan, with answer. between And to I such going question, of I can't is, so some the question gap piece what's cycle the cyclical think a And to the non-fasteners? But part continue the about fasteners, extent, it. transportation

don't sort elements have great a is gap a impact I sustained is number to the that about, and If we going continue I I the in think of stuff in of QX. talked I that about impact to beneficial quarters. QX saw think think QX that that's as for timing that, what

my the we That's price were in but it history that together, is all reasonable right? quarters. the I think quarter, of think couple put I mute for as we'll when mix against next still neutral would seasonality So expectation. just I I be this

fasteners. in like mind is said, my the cyclical of really to element what seasonality the And in I related wildcard happens

ultimately, flat helpful. also Or there enough is there with. that going I you're mentioned up any in and the you in Is can for which to Holden, then And a you on adjust what second IT term fast growth Super can SG&A can I'm is sense. goal OpEx, guess, then half? long I I you're the tighten optimistic? metrics agree year-over-year hold makes guess that you maybe in where Yes, a you for the going margins FTE bit to And getting invest half? operating provide? second at is,

we to It The aggressive a reflection are. gross going how of will operating the be is depend of the margin. part margin

-- to that of to million, element think about feel reduce So the happens answer headcount, we'll comfortable SG&A need million. the that. to cost that bit we that to $X question your through the by $X again, be do what I QX focus we tighter to aside part cyclical SG&A, will to question relative going perhaps comp of SG&A little of of the and on And do in in I tighter a control right? and And out a able in your expenses. rest to I need the Step our through those control is just mix, that

the organization responding and their down. messages is signal to the of think slowing responding the growth of to sort natural already I

impact Again, that back the that the mix? So in on will what believe half. what being I do does have we underlying leverage and opportunities demand environment the fastener-related happens to have with wildcard better

next from Josh come Our line Morgan of with the question is Pokrzywinski Stanley.

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was That I ask. was pretty close. to going

level of Obviously, higher question inflation chain that country Yes, wave just old a seen we've you. of like that. The tightness. was right -- huge both a supply there. I maybe for

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a think we relatively small it's And those bit that And trend. whether partly market. it's spend over years success been pieces. I piece or because chain. elements we've And to broadly, a business, business it seeing technology about built I are an And the not of built changes. we've more several And busy still some are reasons If X but of it. what it's seen time the but of we've the on supply that which of that system haven't the we last talked support the the I and created building seeing we I plan serve about it. good our We're touched believe on great unplanned at incredible ability at we've we're one to where

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of on what pricing, all period down the we our And kind of I of call result and there. and a utilize in job tariffs and a period deflation the occasional it, then, think of significant ability organization's the much the period do fairly you've didn't blitz last the offsetting PRT and the first perhaps you've we here occurred fasteners. is inflation what a that seen that all great tool, tariffs, We better specific in quite didn't years buckled to seen few We and a and review during outcome. And time. you since I modest on there's get sort now that inflation if pricing tool inflation of organization of recall over -- during developed period the think

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that to when fact and of tremendous pressure lot amount think be, inventory terms XXX come lot and That of XXX one a years. think not the buying managed views XXX the how because of thing just about a branch should where organization days. that that I days improve performance an the other overall our between That's We're But on things we're would an needs because of assets, it environment it relates of ability sitting we lot from we're sort our inventories standpoint, we of can inventory and harvesting thing and up the talked past even And some from I because currently a more than then in in inventory started have harvesting or dropped itself The hub of the reflects in course hand of things of proud the the did between to we're strategically to able standpoint to or versus the investments. pandemic. -- the say of a the where And a X really how in the XXX. once. getting of pandemic fading of unwinding improving how it's the velocity. of I peaked organization's X over what's be it was inventory of do organization as the related it terms is, at

quick Got appreciate That's just comprehensive. it. it. Maybe a I follow-up.

and competition? do disinflate guys space I landscape bit, know anything As competitive a in but folks of your you you'd you've comment is model decelerate seen things see the change? maybe really business some way little given don't other maybe on it the the

one competitive perspective. more the saw think a than cost in -- there, if look in at product inflation there's I that's transportation, and the is it there's I the cost. element more Yes, you than There's and think has inflation costs, are saw element like dynamics aspect one Product too, And don't we changed, landscape inflation from while of container different that container transportation element. we There's product one than that that. things costs. of

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there had we of product distributors that. XXXX, XXXX, of and availability benefited weren't During from that a lot

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last in full incorrect. probably gotten your name interest disclosure, would have of I the And Josh,

of the from questions line with Tommy come next Stephens. Our Moll

update us well. And those, there's around an margins? Any on some helpful some steel given product shipping. for of on give that be there I you that fastener give renegotiation volatility would you Can update has could potential the know pricing with associated as just and

break are neutral Yes. When you expected. cost product into I about at this margins, the product margins fastener from So fasteners, a margin fairly fairly as think mean fairly are things MRO stable. costing in price I mean OEM point, fasteners when arena, and I versus right? it's I think standpoint,

we've on I where do begun end some had we is that adjustment require that circumstances there's again, say, based But really is believe Now that will where that -- that costing markets aligned I I I we as we've certain contracts we in have do and have that process. we about with that happen. before believe very customers improve talked that agreements imported seeing on product to you're have certain see with that adhere our that large and what we'll think

having And I think profitability I'd that's don't that largely, on probably characterize we how it. overall it's our help? as any were impact they think, Does expected. I So adverse level.

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be whoever a I'm you at calls, the everybody, the to in direct good to X balance to again, available I want we Once and was we a earnings luck July year. everybody. run XX:XX to but of these day, hold Holden minutes few call. best And him to apologize you, are Have today. for give of calls a thank call in hour our for going central a queue. in attending time. meeting and

Thank you. today's This teleconference. conclude does

your disconnect at and lines great participation may You time. have day. your you for this Thank a