What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-16 compared with 2025-07-17 · 145 added, 150 removed, 359 unchanged (45% of the section changed)

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Prior to June 30, 2025, we disclosed the number of in-market locations which comprised the total number of branch and Onsite locations.

As our focus shifts from measuring metrics primarily addressing development of capabilities to measuring customer sites served by our selling locations, we will disclose only the number of branch locations.

As our focus shifts from metrics primarily addressing development of capabilities to metrics addressing customer sites served by our selling locations, we intend to disclose only the number of branch locations.

Fastenal is a global leader in the wholesale distribution of industrial and construction supplies.

We distribute these supplies through a network of more than 1,500 branch locations.

We distribute these supplies through a network of approximately 1,600 branch locations.

Our largest end market is manufacturing.

Sales to these customers include products for both original equipment manufacturing (OEM), where our products are consumed in the final products of our customers, and manufacturing, repair, and operations (MRO), where our products are consumed to support the facilities and ongoing operations of our customers.

We also service general and commercial contractors in non-residential end markets as well as farmers, truckers, railroads, oil exploration companies, oil production and refinement companies, mining companies, federal, state, and local governmental entities, schools, warehouse and storage, data centers, and certain retail trades.

We also service general and commercial contractors in non-residential end markets as well as farmers, truckers, railroads, oil exploration companies, oil production and refinement companies, mining companies, federal, state, and local government entities, schools, warehouse and storage, data centers, and certain retail trades.

Geographically, our branch locations and customers are primarily in North America, though we continue to grow our non-North American presence as well.

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Executive Overview

The following table presents a performance summary of our results of operations for the six- and three-month periods ended June 30, 2025 and 2024 .

Six-month Period Three-month Period

The following table presents a performance summary of our results of operations for the nine- and three-month periods ended September 30, 2025 and 2024 .

Nine-month Period Three-month Period

2025 2024 Change 2025 2024 Change

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(1) In the fourth quarter of 2024, we realigned certain employees as a result of a routine review of our organizational structure.

While there is no change to total absolute or total FTE headcount, it produces minor shifts between headcount categories.

While there was no change to total absolute or total FTE headcount, it produced minor shifts between headcount categories.

Historical numbers have been adjusted to reflect this realignment.

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Our total FTE selling and sales support personnel increased by 3 79 to support growth and sales initiatives to target customer acquisition.

We had an increase in our distribution and transportation FTE personnel of 133 to support increased product throughput at our distribution facilities.

We had an increase in our remaining FTE personnel of 106, which related primarily to personnel investments in manufacturing, quality control, IT, and business analytics.

SECOND QUARTER OF 2025 VERSUS SECOND QUARTER OF 2024

We had an increase in our distribution and transportat ion FTE personnel of 106 to support increased product throughput at our distribution facilities.

W e had an increase in our remaining FTE personnel of 189, which related primarily to personnel investments in IT, quality control, and strategy and communications.

THIRD QUARTER OF 2025 VERSUS THIRD QUARTER OF 2024

Results of Operations

The following table sets forth condensed consolidated statements of income information (as a percentage of net sales) for the periods ended June 30:

The following table sets forth condensed consolidated statements of income information (as a percentage of net sales) for the periods ended September 30:

Three-month Period

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Note – Amounts may not foot due to rounding difference.

The table below sets forth net sales and daily sales for the periods ended June 30, and changes in such sales from the prior period to the more recent period:

The table below sets forth net sales and daily sales for the periods ended September 30, and changes in such sales from the prior period to the more recent period:

Three-month Period

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Daily sales impact of currency fluctuations 0.1 % -0.1 %

Net sales increased $164.1, or 8.6%, in the second quarter of 2025 when compared to the second quarter of 2024.

Net sales increased $223.2, or 11.7%, in the third quarter of 2025 when compared to the third quarter of 2024.

Both periods had the same number of selling days.

The results largely reflect the contribution from improved customer contract signings over the past six quarters.

Market conditions remained sluggish, providing minimal contribution.

Chan ges in foreign exchange rates positively affected sales in the second quarter of 2025 by approximately 10 basis points and negatively affected sales in the second quarter of 2024 by approximately 20 basis points.

We experienced an increase in unit sales in the second quarter of 2025.

This was due to a growth in the number of customer sites spending $10K or more per month with Fastenal and, to a lesser degree, growth in average monthly sales per customer site across all customer spend categories.

The im pact of product pricing on net sal es in the second quarter of 2025 was an increase of 140 to 170 basis points , in contrast to the second quarter of 2024, which experienced a decline of 30 to 60 basis points.

Even though industrial production was still sluggish in the third quarter of 2025, t he performance reflects the contribution from improved customer contract signings since the first quarter of 2024.

Chang es in foreign exchange rates positively affected sales in the third quarter of 2025 by approximately 10 basis points and negatively affected sales in the third quarter of 2024 by approximately 10 basis points.

We experienced an increase in unit sales in the third quarter of 2025.

This was due to growth in the number of customer sites spending $10k or more per month with Fastenal and, to a lesser degree, growth in average monthly sales per customer site across all customer spend categories.

The im pact of product pricing on net sal es in the third quarter of 2025 was an increase of 240 to 270 basis point s, in contrast to the third quarter of 2024, when the impact of product pricing was not material.

From a product standpoint, we have three categories:

fasteners, including fasteners used in OEM and MRO, safety supplies, and other product lines, the latter of which includes eight smaller product categories, such as tools, janitorial supplies, and cutting tools.

With industrial production still sluggish in the second quarter of 2025, the performance of our fastener product line continued to lag our non-fastener product lines.

The fastener category experienced improved growth in the second quarter of 2025, as compared to the second quarter of 2024.

This was driven by easier comparisons, increased contribution from large customer signings, better product availability in our distribution centers, and pricing actions implemented in the second quarter of 2025.

We achieved growth in our safety category reflecting the lower volatility of PPE demand, which tends to be utilized in more MRO than OEM applications, growth of our vending installed b ase, and success with warehousing and data center customers.

Other product lines experienced higher growth from MRO-oriented lines, such as electrical and janitorial, rather than from OEM-oriented lines, such as cutting tools and welding/abrasives, reflecting continued soft manufacturing demand.

Industrial production was still sluggish in the third quarter of 2025;

however, the performance of our fastener product line outperformed our non-fastener product lines.

The fastener category experienced improved growth in the third quarter of 2025, as compared to the third quarter of 2024, driven by easier comparisons, increased contribution from large customer signings, better product availability in our distribution centers, and pricing actions implemented in the second and third quarters of 2025.

Other product lines experienced higher growth from MRO-oriented lines, such as janitorial, and from OEM-oriented lines, such as welding/

abrasives, despite continued soft manufacturing demand.

The DSR change when compared to the same period in the prior year and the percent of sales in the period were as follows:

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This disproportionately benefits manufacturing customers.

The non-residential construction end market experienced growth for the first time in ten consecutive quarters.

Other end market sales were favorably impacted by growth with warehousing and storage, and data center customers, which were partially offset by declining sales with resellers.

The DSR change when compared to the same period in the prior year and the percent of sales in the period were as follows:

The non-residential construction end market experienced growth for the second time in twelve consecutive quarters.

Other end market sales were favorably impacted by growth with education and healthcare, transportation, and data center customers.

These were partially offset by declining sales with resellers, although at a lower decline than we've historically seen.

The D SR change when compared to the same period in the prior year and the percent of sales in the period were as follows:

Three-month Period % of Sales

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contracts, which include national multi-site, local and regional, and government customers with significant revenue potential, and non-contracts, which include all other customers.

Sales with our contract customers continue to outperform as we realize incremental sales from implementing strong customer signings that we have achieved over the last six quarters, which was partially offset by subdued business activity.

Sales with our contract customers continue to outperform as we realize incremental sales from implementing strong customer signings that we have achieved since the first quarter of 2024, which was partially offset by subdued business activity.

Non-contract customers tend to be smaller and utilize fewer of our tools and capabilities, providing fewer avenues for share gains and therefore more closely reflect overall business trends, which remain sluggish.

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FASTBin and FASTVend incorporate highly efficient and powerful embedded data tracking and fulfillment processing technologies.

The first statistic is a weighted FMI ® measure , which combines the signings and installations of FASTBin and FASTVend in a standardized machine equivalent unit (MEU) based on the expected output of each type of device.

The first statistic below is a weighted FMI ® measure , which combines the signings and installations of FASTBin and FASTVend in a standardized machine equivalent unit (MEU) based on the expected output of each type of device.

We do not include FASTStock in this measurement because scanned stocking locations can take many forms, such as bins, shelves, cabinets, pallets, etc., that cannot be converted into a standardized MEU.

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A portion of the growth in sales experienced by FMI, particularly FASTStock and FASTBin, reflects the migration of products from less efficient non-digital stocking locations to more efficient, digital stocking locations.

We signed 6,458 weighted FASTBin and FASTVend devices in the second quarter of 2025.

Our goal for weighted FASTBin and FASTVend device signings in 2025 is 25,000 to 26,000 MEU (our previous goal was 28,000 to 30,000 MEUs).

We signed 7,050 weighted FASTBin and FASTVend devices in the third quarter of 2025.

Our goal for weighted FASTBin and FASTVend device signings in 2025 remains between 25,000 to 26,000 MEUs.

The table below summarizes signings and installations of our FMI devices and sales through our FMI devices, eBusiness (1) tools, and Digital Footprint (2) .

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(3) Weighted FASTBin/FASTVend signings and installations reflects the percent change compared to the same period in the prior year.

Our gross prof it, as a percentage of net sales, increased to 45.3% in the second quarter of 2025 from 45.1% in the second quarter of 2024.

Price/cost had a slightly favorable impact on our gross profit percentage.

Improved margin on fastener sales relating to the fastener expansion project and other supplier-focused initiatives contributed to the increase.

The aforementioned positive effects on our gross profit percentage were partly offset by a number of variables.

First, customer and product mix diluted our gross profit percentage.

This reflects relatively stronger growth from large customers, including Onsite-like customers, and non-fastener products, each of which tend to have a lower gross profit percentage than our business as a whole.

Second, we experienced higher import duty costs and higher fleet and transportation costs due to inflation in vehicle costs as we cycle our fleet and in third-party freight costs.

Third, customer and supplier incentives were a slight drag on our gross profit percentage.

Our gross prof it, as a percentage of net sales, increased to 45.3% in the third quarter of 2025 from 44.9% in the third quarter of 2024.

The fastener expansion project, other supplier-focused initiatives, and improvements in customer and supplier incentives contributed to the gross profit percentage increase in the third quarter of 2025.

The aforementioned positive effects on our gross profit percentage were partially offset by a couple of variables.

First, c ustomer mix diluted our gross profit percentage.

This reflects relatively stronger growth from large customers, including Onsite-like customers, which tend to have a lower gross profit percentage tha n our business as a whole.

Second, we experienced higher organizational/overhead costs, primarily due to certain working capital being relieved from inventory generating higher period costs.

Price/cost had a neutral impact on our gross profit percentage.

SG&A Expenses

Our SG&A expenses, as a percentage of net sales, were 24.4% in the second quarter of 2025 versus 24.9% in the second quarter of 2024.

This reflects growth in SG&A of 6.3% in the second quarter of 2025 versus net sales growth of 8.6% in the same period of 2025.

Our SG&A expenses, as a percentage of net sales, were unchanged at 24.6% in the third quarter of 2025 from 24.6% in the third quarter of 2024.

Th e percentage change in employee- related, occupancy-related, and all other SG&A expenses compared to the same period in the preceding year, is outlined in the table below.

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(1) payroll (which includes cash compensation, stock option expense, and profit sharing), (2) health care, (3) personnel development, and (4) social taxes.

In the second quarter of 2025, our employee-relate d expenses increased when com pared to the second quarter of 2024.

In the third quarter of 2025, our employee-relate d expenses increased when com pared to the third quarter of 2024.

We experienced an increase in employee base pay, although at a rate below the growth in sales, due to higher average FTE during the period, and, to a lesser degree, higher average wages during the period.

Bonuses and commissions and profit sharing increased at a rate greater than sales as a result of improved business activity and financial performance versus the year-ago period.

Additionally, health insurance costs increased at a rate greater than sales.

The table below summarizes our FTE headcount at the end of the periods presented and the percentage change compared to the end of the prior periods:

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In the fourth quarter of 2024, we realigned certain employees as a result of a routine review of our organizational structure.

While there is no change to total absolute or total FTE headcount, it produces minor shifts between headcount categories.

While there was no change to total absolute or total FTE headcount, it produced minor shifts between headcount categories.

Historical numbers have been adjusted to reflect this realignment.

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(1) building rent and depreciation, (2) building utility costs, (3) equipment related to our branches and distribution locations, and (4) industrial vending equipment and bins utilized as part of FMI services (we consider this hardware to be a logical extension of our in-market operations and classify the depreciation and repair costs as occupancy expenses).

In the second quarter of 2025, our occupancy-related expenses increased when compared to the second quarter of 2024.

This was primarily a result of general inflation in branch rental costs and slightly higher depreciation from an increase in the installed base of FMI hardware.

In the third quarter of 2025, our occupancy-related expenses increased when compared to the third quarter of 2024.

This was driven by general inflation in branch rental costs and, to a lesser degree, higher depreciation from an increase in the installed base of FMI hardware.

All other SG&A expenses include:

(1) selling-related transportation, (2) IT expenses, (3) general corporate expenses, which consist of legal expenses, general insurance expenses, travel and marketing expenses, etc., and (4) sales of property and equipment.

Combined, all other SG&A expenses decreased in the second quarter of 2025 when compared to the second quarter of 2024.

Sales-related travel and IT expenses increased slightly.

These increases were more than offset by an increase in supplier marketing credits and reductions in general insurance expense.

Combined, all other SG&A expenses increased in the third quarter of 2025 when compared to the third quarter of 2024.

Selling-related transportation costs were higher, reflecting higher lease costs, which were only partially offset by lower fuel expense.

We had relatively smaller increases in IT, realized losses on currency conversion, sales-related travel expense, and bad debt expense, which were partially offset by reductions in general insurance expense and increases in joint marketing efforts with our suppliers.

Operating Income

Our operating income, as a percentage of net sales, increased to 21.0% in the second quarter of 2025 from 20.2% in the second quarter of 2024.

We ha d higher interest income earned during the second quarter of 2025.

We had higher interest expense as a result of higher borrowings through the second quarter of 2025.

The increase in interest income relative to interest expense resulted in our generating net interest income of $0.5 in the second quarter of 2025, which compared to net interest expense $0.5 in the second quarter of 2024.

We recorded income tax expense of $106.3 in the second quarter of 2025, or 24.4% of income before income taxes.

Income tax expense was $93.7 in the second quarter of 2024, or 24.2% of income before income taxes.

Our operating income, as a percentage of net sales, increased to 20.7% in the third quarter of 2025 from 20.3% in the third quarter of 2024.

We had lower interest income earned during the third quarter of 2025 and lower interest expense in the third quarter of 2025.

The decrease in interest income relative to interest expense resulted in net interest expense of $0.9 in the third quarter of 2025, which compared to net interest expense of $0.5 in the third quarter of 2024.

We recorded income tax expense of $105.1 in the third quarter of 2025, or 23.9% of in com e before income taxes.

Income tax expense was $ 89.5 in the third quarter of 2024, or 23.1% of income before income taxes.

Our tax rate in the third quarter of 2025 was below our expected ongoing tax rate due to a decrease in our liability for unrecognized tax benefits in the third quarter of 2025, and the tax benefits associated with the exercise of stock options during the period.

These reductions were partially offset by the return to provision adjustments processed in the third quarter of 2025.

We believe our ongoing tax rate, absent any discrete tax items or broader changes to tax law, will be approximately 24.5%.

On July 4, 2025, the U.S.

1 "A bill to provide for reconciliation pursuant to Title II of H.

14", commonly referred to as the One Big Beautiful Bill Act (OBBBA).

Changes in tax laws may affect recorded deferred tax assets and deferred tax liabilities and our effective tax rate in the future and we continue to evaluate the impacts the new legislation will have on the Condensed Consolidated Financial Statements.

As a result of the enactment of H.R.

1, we anticipate an impact to the deferred tax liability and the income tax payable related to the provisions for 100% bonus depreciation for assets placed in service after January 19, 2025 and full expensing of domestic research and experimental expenditures.

We do not expect any material change to our ongoing tax rate as a result of this legislation.

Our net income during the second quarter of 2025 was $330.3, an increase of 12.8% compared to the second quarter of 2024.

Our diluted net income per share was $0.29 in the second quarter of 2025, compared to $0.25 in the second quarter of 2024.

enacted the One Big Beautiful Bill Act (OBBBA).

The impact of the OBBBA enactment is immaterial to our Condensed Consolidated Financial Statements.

Our net income during the third quarter of 2025 was $333.5, an increase of 12.6% compared to the third quarter of 2024.

Our diluted net income per share was $0.29 in the third quarter of 2025, compared to $0.26 in the third quarter of 2024.

Liquidity and Capital Resources

Cash flow activity was as follows for the periods ended June 30:

Cash flow activity was as follows for the periods ended September 30:

Three-month Period

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Net Cash Provided by Operating Activities

Net cash provided by operating activities increased $20.6 in the second quarter of 2025 when compared to the second quarter of 2024.

T he decrease in operating cash flow, as a percent of net income, primarily reflects our operating assets and liabilities being a greater use of cash in the second quarter of 2025 as compared to the second quarter of 2024.

The dollar and percentage change in accounts receivable, net, inventories, and accounts payable as of June 30, 2025 when compared to June 30, 2024 were as follows:

June 30 Twelve-month Dollar Change Twelve-month Percentage Change

Net cash provided by operating activities increased $90.0 in the third quarter of 2025 when compared to the third quarter of 2024.

The increase in operating cash flow, as a percent of net income, primarily reflects a reduction in estimated income tax payments relating to the reinstatement of bonus depreciation in 2025 and working capital being a modest source of cash in the third quarter of 2025, as opposed to a use of cash in the third quarter of 2024.

The dollar and percentage change in accounts receivable, net, inventories, and accounts payable as of September 30, 2025 when compared to September 30, 2024 were as follows:

September 30 Twelve-month Dollar Change Twelve-month Percentage Change

2025 2024 2025 2025

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Net sales in last three months $ 2,133.3 1,910.2 $ 223.2 11.7 %

Note - Amounts may not foot due to rounding difference.

The increase in our accounts receivable balance in the second quarter of 2025 was primarily attributable to growth in sales with our customers, including relative growth with larger customers that tend to carry longer payment terms.

The increase in our inventory balance in the second quarter of 2025 was primarily attributable to three factors.

First, we added inventory to support projected growth in our business and, to a lesser extent, the anticipated impact of tariffs.

Second, our inventory increased as a result of growth in sales with certain customers and the addition of stock to ensure we can support their future growth.

Third, we added inventory to support our fastener expansion and optimal package quantity initiatives, which are intended to improve service to our in-market locations and generate efficiencies in our hubs.

The increase in our accounts payable balance in the second quarter of 2025 was primarily attributable to an increase in our product purchases as reflected in the growth in inventories.

Note - Amounts may not foot due to rounding differences.

The increase in our accounts receivable balance in the third quarter of 2025 was primarily attributable to growth in sales with our customers, including relative growth with larger customers that tend to carry longer payment terms.

The increase in our inventory balance in the third quarter of 2025 was primarily attributable to two factors.

First, we added inventory to support projected growth in our business.

Second, and to a lesser extent, tariffs and general inflation have led to increased inventory valuation.

The increase in our accounts payable balance in the third quarter of 2025 was primarily attributable to an increase in our product purchases as reflected in the growth in inventories.

Net Cash Used in Investing Activities

Net cash used in investi ng activities increased $11.7 in the second quarter of 2025 when compared to the second quarter of 2024.

This was due to an increase in purchases of property and equipment in the second quarter of 2025 compared to the second quarter of 2024.

Net cash used in investi ng activities decreased $1.1 in the third quarter of 2025 when compared to the third quarter of 2024.

This was primarily related to an increase in spending for FMI hardware to support growth in our installed base, facility construction and upgrades, IT, and vehicles that was partially offset by an increase in proceeds from sales of vehicles and property.

Our capital spending typically falls into five categories:

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Proceeds from the sales of property and equipment, typically for the planned disposition of pick-up trucks as well as distribution vehicles and trailers in the normal course of business, are netted against these purchases and additions.

During the second quarter of 2025, our net capital expenditures (purchases of property and equipment, net of proceeds from sales of property and equipment) were $64.3, which was a slight increase from $52.6 in the second quarter of 2024.

This was primarily related to an increase in spending for FMI hardware to support growth in our installed base, facility construction and upgrades, IT, and vehicles.

During the third quarter of 2025, our net capital expenditures (purchases of property and equipment, net of proceeds from sales of property and equipment) were $54.7, which was a slight decrease from $55.8 in the third quarter of 2024.

Cash requirements for capital expenditures were satisfied from cash generated from operations, available cash and cash equivalents, our borrowing capacity, and the proceeds of disposals.

For 2025, we expect our net capital expenditures to be within a range of $250.0 to $270.0, a decrease from our originally anticipated range ($265.0 to $285.0) and an increase from $214.1 in 2024.

For 2025, we expect our net capital expenditures to be within a range of $235.0 to $255.0, an increase from $214.1 in 2024.

The expected growth on a year-to-year basis reflects three items.

First, we expect higher distribution center spending to complete our replacement Utah hub facility, begin construction on a replacement Atlanta hub facility, and improve our picking capacity and efficiency across our hub network.

Second, we expect elevated IT spending as projects that were expected in 2024 experienced delays and will occur in 2025.

Third, we expect greater outlays for FMI hardware reflecting an increase in our targeted signings.

First, we had higher distribution center spending as we completed construction of our replacement Utah hub facility in the third quarter of 2025, began construction on a replacement Atlanta hub facility, and improved our picking capacity and efficiency across our hub network.

Second, we expect greater outlays for FMI hardware.

Third, we expect elevated IT spending as projects that were expected in 2024 experienced delays and are expected to continue throughout 2025.

Net Cash Used in Financing Activities

Net cash used in financin g activities increased $30.9 in the second quarter of 2025 when compared to the second quarter of 2024.

In the second quarter of 2025, we had higher average borrowings outstanding and were using capital to reduce those balances.

In contrast, in the second quarter of 2024, we had lower average borrowings.

As a result, we used significantly more capital to reduce debt balances in the second quarter of 2025 relative to the second quarter of 2024.

Net cash used in financin g activities increased $70.2 in the third quarter of 2025 when compared to the third quarter of 2024.

In the third quarter of 2025, we ha d higher average borrowings outstanding and were using capital to reduce those balances.

In contrast, during the third quarter of 2024, we had lower average borrowings and a smaller proportion of those balances were part of a facility that was eligible for repayment.

As a result, we used significantly more capital to reduce debt balances in the third quarter of 2025 relative to the third quarter of 2024.

We also increased capital returned to shareholders through dividends in the period.

During the second quarter of 2025, we returned $252.5 to our shareholders in the form of dividends, c ompared to the second quarter of 2024 when we returned $223.3 to our shareholders in the form of dividends.

During the first six months of 2025, we returned $499.1 to our shareholders in the form of dividends, compared to the first six months of 2024 when we returned $446.5 to our shareholders in the form of dividends.

During the third quarter of 2025, we returned $ 252.5 to our shareholders in the form of dividends, compared to the third quart er of 2024 when we returned $223.4 to our shareholders in the form of dividends.

We did not repurchase any of our common stock in either period.

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This authorization does not have an expiration date.

Total debt on our balance sheet was $230.0 at the end of the second quarter of 2025, or 5.7% of total capital (the sum of stockholders' equity and total debt).

This compares to $235.0, or 6.3% of total capital, at the end of the second quarter of 2024.

The slight reduction in debt at the end of the second quarter of 2025 versus the prior period reflects strong generation of net cash provided by operating activities over the last 12 months in excess of what was necessary to finance net capital expenditures, payment of dividends, and other investing and financing cash needs.

Total debt on our balance sheet was $195.0 at the end of the third quarter of 2025, or 4.8% of total capital (the sum of stockholders' equity and total debt).

This compares to $240.0, or 6.3% of total capital, at the end of the third quarter of 2024.

The reduction in debt at the end of the third quarter of 2025 versus the prior period reflects strong generation of net cash provided by operating activities over the last 12 months in excess of what was necessary to finance net capital expenditures, payment of dividends, and other investing and financing cash needs.

Our material cash requirements for known contractual ob ligations include capital exp enditures, debt, and lease obligations, each of which are discussed in more detail earlier in this report in the Notes to Condensed Consolidated Financial Statements and in our 2024 annual report on Form 10-K.

An overview of our cash dividends paid or declared in 2025 and 2024 is contained in Note 3 of the Notes to Condensed Consolidated Financial Statements.

SIX MONTHS ENDED JUNE 30, 2025 VERSUS SIX MONTHS ENDED JUNE 30, 2024

NINE MONTHS ENDED SEPTEMBER 30, 2025 VERSUS NINE MONTHS ENDED SEPTEMBER 30, 2024

Results of Operations

The following table sets forth condensed consolidated statements of income information (as a percentage of net sales) for the periods ended June 30:

Six-month Period

The following table sets forth condensed consolidated statements of income information (as a percentage of net sales) for the periods ended September 30:

Nine-month Period

Net sales 100.0 % 100.0 %

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Income before income taxes 20.6 % 20.3 %

Note – Amounts may not foot due to rounding difference.

The table below sets forth net sales and daily sales for the periods ended June 30, and changes in such sales from the prior period to the more recent period:

Six-month Period

Note – Amounts may not foot due to rounding differences.

The table below sets forth net sales and daily sales for the periods ended September 30, and changes in such sales from the prior period to the more recent period:

Nine-month Period

Net sales $ 6,173.1 5,721.5

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Daily sales impact of currency fluctuations -0.1 % -0.1 %

Net sales increased $228.4, or 6.0%, in the first six months of 2025 when compared to the first six months of 2024.

The effect of adverse weather in the first six months of 2025 was a reduction in sales by 25 to 35 basis points compared to the first six months of 2024 when the effect of adverse weather was a reduction in sales by 15 to 35 basis points.

Changes in fore ign exchange rates negatively affected sales in the first six months of 2025 and 2024 by approximately 20 and 10 basis points, respectively.

We experienced an increase in unit sales in the first six months of 2025 when compared to the first six months of 2024.

Net sales increased $451.6, or 7.9%, in the first nine months of 2025 when compared to the first nine months of 2024.

The effect from adverse weather in the first nine months of 2025 was not material compared to the first nine months of 2024, when the effect of adverse weather was a reduction in sales by 10 to 30 basis points.

Changes in foreign exchange rates negatively affected sales by approximately 10 basis points in the first nine months of 2025 and 2024.

We experienced an increase in unit sales in the first nine months of 2025 when compared to the first nine months of 2024.

This was primarily due to growth with large customers, both those operating out of Onsite locations that have been opened in the last two years and, to a lesser degree, those being serviced from traditional branch operations.

The impact of product pricing on net sales in the first six months of 2025 was an increase of 70 to 100 basis points, compared to the first six months of 2024, which experienced a decline of 10 to 40 basis points.

The increase reflects pricing actions implemented in the second quarter of 2025 to address additional tariffs enacted beginning in February 2025.

The impact of product pricing on net sales in the first nine months of 2025 w as an increase of 130 to 160 basis points, compared to the first nine months of 2024, which experienced a decline of 10 to 40 basis points.

The increase reflects pricing actions implemented in the second and third quarters of 2025 to address additional tariffs enacted beginning in February 2025.

From a product standpoint, we have three categories:

With industrial production still sluggish in the first half of 2025, the performance of our fastener product line continued to lag our non-fastener product lines.

The fastener category experienced improved growth in the first half of 2025.

With industrial production still sluggish in the first nine months of 2025, the performance of our fastener product line continued to lag our non-fastener product lines.

The fastener category experienced improved growth in the first nine months of 2025 driven by easier comparisons, increased contribution from large customer signings, better product availability in our distribution centers, and pricing actions implemented in the second and third quarters of 2025.

We achieved growth in our safety category reflecting the lower volatility of PPE demand, which tends to be utilized in more MRO than OEM applications, growth of our vending installed base, and success with warehousing and data center customers.

Other product lines experienced higher growth from MRO-oriented lines, such as janitorial and material handling, rather than from OEM-oriented lines, such as cutting tools and welding/abrasives, reflecting continued soft manufacturing demand.

The DSR change when compared to the same period in the prior year and the percent of sales in the period were as follows:

Six-month Period

Nine-month Period

2025 2024 2025 2024

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This disproportionately benefits manufacturing customers.

Other end market sales are improving primarily as a result of strength with warehousing customers due to market share gains and product mix.

Other end market sales are improving primarily as a result of strength with transportation, education and healthcare, and data center customers due to market share gains and product mix.

The DSR change when compared to the same period in the prior year and the percent of sales in the period were as follows:

Six-month Period

Nine-month Period

2025 2024 2025 2024

7 unchanged sentences

contracts, which include national multi-site, local and regional, and government customers with significant revenue potential, and non-contracts, which include all other customers.

The DSR change when compared to the same period in the prior y ear and the percent of sales in the period were as follows:

Six-month Period

Nine-month Period

2025 2024 2025 2024

1 unchanged sentence

Non-contract sales 2.0 % -8.6 % 26.6 % 28.7 %

We signed 12,875 weighted FASTBin and FASTVend devices in the first six months of 2025.

We signed 19,925 weighted FASTBin and FASTVend devices in the first nine months of 2025.

The table below summarizes signings and installations of our FMI devices and sales through our FMI devices, eBusiness (1) tools, and Digital Footprint (2) .

Six-month Period

Nine-month Period

2025 2024 DSR

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(3) Weighted FASTBin/FASTVend signings and installations reflects the percent change compared to the same period in the prior year.

Our gross profit, as a percentage of net sales, decreased to 45.2% in the first six months of 2025, from 45.3% in the first six months of 2024.

The largest factor behind the decline in our gross profit percentage in the first six months of 2025 was customer and product mix.

We continued to experience relatively strong growth from Onsite customers and non-fastener products, each of which tend to have a lower gross profit percentage than our business as a whole.

We also experienced higher import duty costs and higher fleet and transportation costs due to inflation in vehicle costs as we cycle our fleet and in third-party freight costs.

These adverse impacts were partly offset by slightly favorable price-cost in the second quarter of 2025 and the ongoing fastener expansion project and other supplier-focused initiatives, which favorably impacted our gross profit percentage.

Our gross profit, as a percentage of net sales, was 45.2% in the first nine months of 2025 and the first nine months of 2024.

T he fastener expansion project, other supplier-focused initiatives, slightly favorable price/cost, and improvements in customer and supplier incentives increased our gross profit percentage in the first nine months of 2025.

The aforementioned positive effects on our gross profit percentage were offset by a number of variables.

First, customer and product mix diluted our gross profit percentage.

Second, we experienced higher freight costs.

Third, we experienced higher organizational/overhead costs, primarily due to certain working capital being relieved from inventory generating higher period costs.

SG&A Expenses

Our SG&A expenses, as a percentage of net sales, were 24.7% in the first six months of 2025 down from 24.9% in the first six months of 2024.

Efforts to control growth in operating expenses in the first six months of 2025 produced a 5.1% expansion of total SG&A expenses in the period.

Growth in net sales was above growth in SG&A expenses, resulting in our leveraging of costs in the first six months of 2025.

Th e percentage change in employee- related, occupancy-related, and all other SG&A expenses compared to the same period in the preceding year, is outlined in the table below.

Approximate Percentage of Total SG&A Expenses Six-month Period

Our SG&A expenses, as a percentage of net sales, were 24.6% in the first nine months of 2025 down from 24.8% in the first nine months of 2024.

Efforts to control growth in operating expenses in the first nine months of 2025 produced a 7.2% expansion of total SG&A expenses in the period.

Growth in net sales was above growth in SG&A expenses, resulting in our leveraging of costs in the first nine months of 2025.

The percentage change in employee-related, occupancy-related, and all other SG&A expenses compared to the same period in the preceding year, is outlined in the table below.

Approximate Percentage of Total SG&A Expenses Nine-month Period

Employee-related expenses 70% to 75% 8.5 %

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All other SG&A expenses 10% to 15% 2.8 %

In the first six months of 2025, our employee-related expenses increased when compared to the first six months of 2024.

In the first nine months of 2025, our employee-related expenses increased when compared to the first nine months of 2024.

Bonus and commission expense grew faster than the increase in net sales, as a result of improved sales and profit growth versus the prior year period.

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In the fourth quarter of 2024, we realigned certain employees as a result of a routine review of our organizational structure.

While there is no change to total absolute or total FTE headcount, it produces minor shifts between headcount categories.

While there was no change to total absolute or total FTE headcount, it produced minor shifts between headcount categories.

Historical numbers have been adjusted to reflect this realignment.

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and (3) Administrative Support personnel (22% to 27% of category), which includes human resources, Fastenal School of Business, accounting and finance, senior management, etc.

In the first six months of 2025, our occupancy-related expenses increased when compared to the first six months of 2024.

In the first nine months of 2025, our occupancy-related expense s increased wh en compared to the first nine months of 2024.

We had moderate increases in branch costs related to inflation, as well as non-branch expenses from incremental depreciation and other costs associated with hub investments and upgrades.

FMI FASTBin depreciation and expense increased, reflecting higher installations.

Combined, all other SG&A expenses decreased in the first six months of 2025 when compared to the first six months of 2024.

Combined, all other SG&A expenses increased in the first nine months of 2025 when compared to the first nine months of 2024.

This reflects a number of items.

We experienced higher lease costs in our selling-related vehicle fleet due to an increase in the mix of larger truck types and higher prices on newer vehicles which were only partly offset by reductions in fuel expense.

IT, sales-related travel, and supplies expense also increased.

These increases were more than offset by increased supplier marketing credits and a reduction in general insurance expense.

Selling-related transportation costs were higher, reflecting higher lease costs, which were only partially offset by lower fuel expense.

We had relatively smaller increases in IT, sales-related travel expense, bad debt expense, and realized losses on currency conversion, which were partially offset by increases in joint marketing efforts with our suppliers and reductions in general insurance expense.

Operating Income

Our operating income, as a percentage of net sales, increased to 20.5% in the first six months of 2025 from 20.4% in the first six months of 2024.

We had higher interest income in the first six months of 2025 .

The increase in interest income relative to interest expense resulted in our generating net interest expense of $ 0.2 in the first six months of 2025, compared to $0.9 in the first six months of 2024.

We recorded income tax expense of $200.9 in the first six months of 2025, or 24.2% of income before income taxes.

Income tax expense was $185.8 in the first six months of 2024, or 23.9% of income before income taxes.

Our operating income, as a percentage of net sales, increased to 20.6% in the first nine months of 2025 from 20.4% in the first nine months of 2024.

We had slightly higher interest income in the first nine months of 2025 and lower interest expense in the first nine months of 2025 .

Th e increase i n interest income relative to interest expense resulted in net interest expense of $1.0 in the first nine months of 2025, compared to net interest expense of $1.4 in the first nine months of 2024.

We recorded income tax expense of $306.0 in the first nine months of 2025, or 24.1% of income before income taxes.

Income tax expense was $275.3 in the first nine months of 2024, or 23.7% of income before income taxes.

Our tax rate in the first nine months of 2025 was below our expected ongoing tax rate due to the tax benefits associated with the exercise of stock options during the period, and a decrease in our liability for unrecognized tax benefits in the third quarter of 2025.

These reductions were partially offset by the return to provision adjustments processed in the third quarter of 2025.

We believe our ongoing tax rate, absent any discrete tax items or broader changes to tax law, will be approximately 24.5%.

Our net income during the first six months of 2025 was $628.9, an increase of 6.5% compared to the first six months of 2024.

Our diluted net income per share was $0.55 in the first six months of 2025, compared to $0.51 in the first six months of 2024.

Our net income during the first nine months of 2025 was $964.4, an increase of 8.5% compared to the first nine months of 2024.

Our diluted net income per share was $0.84 in the first nine months of 2025, compared to $0.77 in the first nine months of 2024.

Liquidity and Capital Resources

Cash flow activity was as follows for the periods ended June 30:

Six-month Period

Cash flow activity was as follows for the periods ended September 30:

Nine-month Period

Five-Year Average (1)

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Net Cash Provided by Operating Activities

Net cash provided by op erating activities decreased $52.8 in the first six months of 2025 when compared to the first six months of 2024 .

T he decrease in operating cash flow, as a percent of net income, primarily reflects our operating assets and liabilities being a more significant use of cash in the first six months of 2025 as compared to the first six months of 2024.

Net cash provided by op erating activities increased $37.3 in the first nine months of 2025 when compared to the first nine months of 2024 .

The decrease in operating cash flow, as a percent of net income, primarily reflects our operating assets and liabilities being a more significant use of cash, which was only partially offset by a reduction in estimated income tax payments in the first nine months of 2025 than in the first nine months of 2024.

Net Cash Used in Investing Activities

Net cash used in investing activities increased $17.2 in the first six months of 2025 when compared to the first six months of 2024.

During the first six months of 2025, our net capital expenditures were $118.1, which was an increase from $100.9 in the first six months of 2024.

Net cash used in investing activities increased $16.1 in the first nine months of 2025 when compared to the first nine months of 2024.

During the first nine months of 2025, our net capital expenditures were $172.8, which was an increase from $156.7 in the first nine months of 2024.

This was primarily related to an increase in spending on FMI hardware to support growth in our installed base, facility construction and upgrades, IT, and vehicles.

Net Cash Used in Financing Activities

Net cash used in financing activities decreased $1.1 in the first six months of 2025 when compared to the first six months of 2024.

This was primarily due to reducing our net indebtedness less in the first six months of 2025 than we did in the first six months of 2024.

Net cash used in financing activities increased $69.1 in the first nine months of 2025 when compared to the first nine months of 2024.

This was primarily due to reducing our net indebtedness less in the first nine months of 2025 than we did in the first nine months of 2024.

This was partly offset by an increase in capital returned to shareholders through dividends in the period.

During the first six months of 2025, we returned $499.1 to our shareholders in the f orm of dividends, compared to the first six months of 2024 when we returned $446.5 to our shareholders in the form of dividends.

During the first nine months of 2025, we ret urned $751.6 to o ur shareholders in the f orm of dividends, compared to the first nine months of 2024 when we returned $669.9 to our shareholders in the form of dividends.

We did not repurchase any of our common stock in either period.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis