THIRD QUARTER
OCTOBER 12, 2023
1
SAFE HARBOR STATEMENT
All statements made herein that are not historical facts (e.g., future operating results, long-term share gains, and business activity, as well as expectations regarding operations, including gross margin, future inventory levels, pricing, Onsite and weighted FMI device signings, the size of our U.S./Canada network of traditional branches, operating costs, capital expenditures, sales through our digital footprint, and supply chain matters) are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially. More information regarding such risks can be found in our most recent annual and quarterly reports filed with the Securities and Exchange Commission. Any numerical or other representations in this presentation do not represent guidance by management and should not be construed as such. The appendix to the following presentation includes non-GAAP financial measures. Information required by Regulation G with respect to such non-GAAP financial measures can be found in the appendix including a comparison and reconciliation to the comparable GAAP measures.
2
CEO MESSAGES ON 3Q23
20% | Daily Sales Rate (DSR) Growth | |||||||||||
18.4% 18.0% | ||||||||||||
18% | ||||||||||||
16.0% | ||||||||||||
16% | 14.6% | |||||||||||
14% | ||||||||||||
12% | 10.0% | 10.7% | ||||||||||
10% | 9.1% | |||||||||||
8% | 5.9% | |||||||||||
6% | 5.3% | |||||||||||
4.0% | ||||||||||||
4% | ||||||||||||
2% | (0.1%) | |||||||||||
0% | ||||||||||||
1Q21 | 2Q21 | 3Q21 | 4Q21 | 1Q22 | 2Q22 | 3Q22 | 4Q22 | 1Q23 | 2Q23 | 3Q23 | 4Q23 | |
EPS
(Fully Diluted)
$0.55 | $0.50 | $0.52 | |||||||||
$0.50 | |||||||||||
$0.45 | $0.42 | ||||||||||
$0.40 | |||||||||||
$0.35 | |||||||||||
$0.30 | |||||||||||
$0.25 | |||||||||||
$0.20 | |||||||||||
$0.15 | |||||||||||
$0.10 | |||||||||||
$0.05 | |||||||||||
$0.00 | |||||||||||
1Q21 | 2Q21 | 3Q21 | 4Q21 | 1Q22 | 2Q22 | 3Q22 | 4Q22 | 1Q23 | 2Q23 | 3Q23 | 4Q23 |
- Conditions remained challenging in 3Q23, reflected in daily sales growth of +4.0%. Still, the period hit a milestone: September was the first month in our history to generate $30M in sales per day. We translated this growth into EPS of $0.52, +4.1%.
- Our results reflect our unique product profile. Fasteners still constitute roughly one-third of our sales, and are heavily OEM-oriented (62.6% of fastener sales and growing); our other lines tend to be more MRO-oriented. As a result, fastener daily sales have decelerated at a faster rate than our non-fastener sales.
- 3Q23 operating margin of 21.0% matched last year despite one less selling day. Most of our SG&A is not variable to business days, and on a same-days basis we think we would have increased our operating margin.
- The Blue Team has effectively worked down and made our inventory more efficient without impeding service. This has produced strong cash flow. Year-to-date, we have converted 121% of our net earnings into operating cash, the highest in a decade that has averaged 95%.
- Our Onsite and FMI installed bases and our Digital Footprint continue to expand. Particularly in the case of Onsite, success can accelerate by driving participation. We believe the potential exists for most of our District Managers to land two new Onsites per year.
3
3Q23 GROWTH DRIVER UPDATE
Onsite Signings and Active Locations
160 | 1,778 | ||
140 | 1,567 | ||
120 | 1,367 | ||
100 | 86 | 93 | |
75 | |||
80 | |||
60 | |||
40 | |||
20 | |||
0 | 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 | ||
Signings | Active Locations |
Weighted FMI Device Signings and Installations
- Onsites: We had 93 signings in 3Q23. Active sites
2,000 | finished at 1,778, +13.5% from 3Q22. Daily sales, |
1,800 | excluding transferred branch sales, grew at a low double- |
1,600 | digit rate from 3Q22. Based on the pace of signings in the |
1,400 | first nine months of 2023, we anticipate signing |
1,200 | approximately 350 Onsite locations in 2023. |
1,000 |
800 • FMI Technology: We signed 5,969 weighted devices
600 (95/day) in 3Q23, versus 5,187 (81/day) in 3Q22. Our
400 installed base was 110,191 weighted devices, +10.8%
200 from 3Q22. Activity through our FMI technology platform
- represented 40.7% of sales in 3Q23, versus 36.9% of sales in 3Q22 and 33.0% of sales in 3Q21. Our 2023 signings goal remains 23,000 to 25,000 MEU of FASTBin and FASTVend units.
10K | 110,191 | 120K | |
90,493 | 99,409 | 100K | |
8K | |||
6K | 5,969 | 80K | |
4,813 | 5,187 | ||
60K | |||
4K | 40K | ||
2K | 20K | ||
0 | 0 | ||
1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 |
SigningsInstallations
- eCommerce: Daily sales rose 41.3% in 3Q23. Large customer-oriented electronic data interface (EDI) was up 33.6%, while web sales were up 65.3%.
- Sales through our Digital Footprint (FMI technology plus non-FMI-related eCommerce) was 57.1% of sales in 3Q23, versus 49.5% in 3Q22. We currently believe sales running through our Digital Footprint will reach 60% at some point in 2023. Our long-term expectation of 85% is unchanged.
4
3Q23 BUSINESS CADENCE
End Market Daily Sales Rate (DSR) Growth
40% | |||||||||||
30% | |||||||||||
20% | |||||||||||
10% | 9.0% | ||||||||||
0% | 2.5% | ||||||||||
(1.3)% | |||||||||||
-10% | |||||||||||
-20% | |||||||||||
1Q21 | 2Q21 | 3Q21 | 4Q21 | 1Q22 | 2Q22 | 3Q22 | 4Q22 | 1Q23 | 2Q23 | 3Q23 | 4Q23 |
Heavy Mfg | All Other Mfg | All Other End Markets | ||
(43.2% of Sales) | (31.1% of Sales) | (25.7% of Sales) |
Product Category Daily Sales Rate (DSR) Growth
40% | |||||||||||
30% | |||||||||||
20% | |||||||||||
10% | 9.2% | ||||||||||
6.8% | |||||||||||
0% | (2.0)% | ||||||||||
-10% | |||||||||||
-20% | |||||||||||
1Q21 | 2Q21 | 3Q21 | 4Q21 | 1Q22 | 2Q22 | 3Q22 | 4Q22 | 1Q23 | 2Q23 | 3Q23 | 4Q23 |
Fasteners | Safety Supplies | Remaining Products | ||
(32.1% of Sales) | (21.4% of Sales) | (46.5% of Sales) |
5
- U.S. Industrial Production was flat in Jul./Aug. 2023 over 3Q22, although heavier manufacturing components continue to modestly decline, a pattern captured by relative weakness of our OEM-heavy fastener product line. U.S. PMI averaged 47.7 in 3Q23; sub-50 readings reflect falling manufacturing activity. September improved to 49.0, however, the highest reading of the year.
- Daily sales grew 4.0% in 3Q23. September grew 5.0% and modestly exceeded the historical sequential average. Based on feedback from regional leadership, this likely reflects easing comparisons more than substantive gains in business activity during the period.
- Price levels eased slightly in 3Q23 primarily due to fasteners. Overall, pricing conditions are mostly stable with contribution to growth from price in 3Q23 within normal historical ranges.
- Manufacturing continues to grow despite softer conditions, as a result of contributions from newer Onsite locations and our customer solution consultant (CSC) initiative. All Other End Markets daily sales declined due to lower sales to non- residential construction and reseller customers, partly offset by higher government and warehousing customers.
- National Accounts' daily sales rose 8.6% in 3Q23, with 63 of our Top 100 customers growing. Non-National Account daily sales fell 1.9% in 3Q23, with 53.1% of our in-market locations growing.
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Fastenal Company published this content on 12 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 October 2023 12:00:26 UTC.