Fastenal(FAST) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements The company's financial statements for Q2 and H1 2025 reflect overall growth in assets, revenue, and net income, alongside a two-for-one stock split Condensed Consolidated Balance Sheets Total assets increased to $5.02 billion as of June 30, 2025, driven by receivables and inventories, with corresponding increases in liabilities and equity Balance Sheet Summary (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $3,461.7 | $3,211.9 | | Total Assets | $5,016.2 | $4,698.0 | | Total Current Liabilities | $820.3 | $687.1 | | Total Liabilities | $1,208.8 | $1,081.7 | | Total Stockholders' Equity | $3,807.4 | $3,616.3 | Condensed Consolidated Statements of Income Q2 2025 net sales grew 8.6% to $2.08 billion and net income rose 12.8% to $330.3 million, with similar growth for the six-month period Income Statement Highlights (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | % Change | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Sales | $2,080.3 | $1,916.2 | 8.6% | $4,039.7 | $3,811.3 | 6.0% | | Gross Profit | $942.8 | $863.5 | 9.2% | $1,826.7 | $1,725.1 | 5.9% | | Operating Income | $436.1 | $386.9 | 12.7% | $830.0 | $777.1 | 6.8% | | Net Income | $330.3 | $292.7 | 12.8% | $628.9 | $590.4 | 6.5% | | Diluted EPS | $0.29 | $0.25 | 16.0% | $0.55 | $0.51 | 7.8% | Condensed Consolidated Statements of Comprehensive Income Comprehensive income for Q2 2025 significantly increased to $361.4 million, driven by higher net income and favorable currency adjustments Comprehensive Income (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income | $330.3 | $292.7 | | Foreign currency translation adjustments | $31.1 | $(7.8) | | Comprehensive Income | $361.4 | $284.9 | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased to $3.81 billion by June 30, 2025, driven by net income, partially offset by increased cash dividends - Cash dividends paid per share increased to $0.220 in Q2 2025 from $0.195 in Q2 2024[17] Change in Retained Earnings - H1 2025 (in millions) | Description | Amount | | :--- | :--- | | Balance at beginning of period | $3,613.5 | | Net income | $628.9 | | Cash dividends paid | $(499.1) | | Balance at end of period | $3,743.3 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities decreased to $540.8 million in H1 2025, while investing and financing activities remained significant Cash Flow Summary - Six Months Ended June 30 (in millions) | Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $540.8 | $593.6 | | Net cash used in investing activities | $(118.3) | $(101.1) | | Net cash used in financing activities | $(451.8) | $(452.9) | | Net (decrease) increase in cash | $(18.0) | $34.2 | Notes to Condensed Consolidated Financial Statements Key notes include a May 2025 two-for-one stock split, U.S. as the dominant revenue segment, and $230.0 million in total debt outstanding - The company announced and completed a two-for-one stock split of its common stock, effective May 21, 2025. All historical share and per-share data have been retroactively adjusted[23] - On July 11, 2025, the board declared a quarterly dividend of $0.22 per share, payable on August 26, 2025[29] - Total debt outstanding as of June 30, 2025, was $230.0 million, up from $200.0 million at year-end 2024. This includes borrowings under an $835.0 million unsecured revolving credit facility and senior unsecured promissory notes[42][43][45] Revenue by Geography - Q2 2025 vs Q2 2024 (in millions) | Region | Q2 2025 Revenue | % of Total | Q2 2024 Revenue | % of Total | | :--- | :--- | :--- | :--- | :--- | | United States | $1,732.8 | 83.3% | $1,594.1 | 83.2% | | Canada and Mexico | $281.4 | 13.5% | $263.9 | 13.8% | | All other foreign | $66.1 | 3.2% | $58.2 | 3.0% | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q2 2025 sales growth driven by contract signings, improved gross margin, operating leverage, and strategic focus on 'high-touch, high-tech' initiatives Executive Overview Q2 2025 saw net sales grow 8.6% to $2.1 billion, operating income increase 12.7%, and operating margin expand, supported by growth in key operational metrics Q2 2025 Performance Summary (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | | Net sales | $2,080.3 | $1,916.2 | 8.6% | | Daily sales | $32.5 | $29.9 | 8.6% | | Gross profit % | 45.3% | 45.1% | +20 bps | | Operating income % | 21.0% | 20.2% | +80 bps | | Diluted net income per share | $0.29 | $0.25 | 12.7% | Key Operational Metrics (as of Q2 2025) | Metric | Q2 2025 | YoY Change | | :--- | :--- | :--- | | Total FTE employee headcount | 21,807 | +2.6% | | Number of branch locations | 1,596 | -0.2% | | Number of $50K+ customer sites | 2,683 | +12.4% | | Weighted FMI devices | 132,174 | +10.8% | Q2 2025 vs. Q2 2024 Analysis Q2 2025 net sales increased 8.6% due to contract customer performance, with gross margin expanding and operating leverage improving, leading to higher net income - Net sales increased 8.6% in Q2 2025, largely reflecting the contribution from improved customer contract signings over the past six quarters[65] - The impact of product pricing on net sales in Q2 2025 was a positive 140 to 170 basis points[66] - Gross profit margin increased to 45.3% from 45.1% in Q2 2024, helped by favorable price/cost, improved fastener margins, and other supplier initiatives[73] - SG&A as a percentage of sales decreased to 24.4% from 24.9% in Q2 2024, indicating operating leverage as sales grew faster than expenses[74] Q2 Daily Sales Rate (DSR) Change by Product Line | Product Line | DSR Change 2025 vs 2024 | % of Sales 2025 | | :--- | :--- | :--- | | Total fasteners | 6.6% | 30.5% | | Safety supplies | 10.7% | 22.2% | | Other product lines | 9.0% | 47.3% | H1 2025 vs. H1 2024 Analysis H1 2025 net sales grew 6.0% to $4.0 billion, with slight gross margin decrease due to mix, improved SG&A efficiency, and a decrease in operating cash flow - Net sales for the first six months of 2025 increased 6.0% to $4,039.7 million, with daily sales growing 6.8%[104] - Gross profit margin decreased slightly to 45.2% from 45.3% in H1 2024, mainly due to customer and product mix, with stronger growth from lower-margin Onsite customers and non-fastener products[109] - SG&A as a percentage of sales improved to 24.7% from 24.9% in H1 2024, as expense growth of 5.1% was below net sales growth[111] H1 Daily Sales Rate (DSR) Change by End Market | End Market | DSR Change 2025 vs 2024 | % of Sales 2025 | | :--- | :--- | :--- | | Total manufacturing | 8.0% | 76.1% | | Non-residential construction | -0.1% | 8.0% | | Other end markets | 4.8% | 15.9% | Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from tariffs, commodity prices, foreign currency, and interest rates, with immaterial impact in H1 2025 but potential future tariff exposure - The company is exposed to risks from tariffs on imported products. While the effect was immaterial in H1 2025, exposure may become more impactful as lower-tariff inventory is depleted[128] - Impacts from commodity steel prices, energy prices, and foreign currency exchange rates were estimated to be immaterial on net income for the first six months of 2025[129][130][132] - The company has floating rate debt; a one percentage point increase in rates would have added approximately $0.3 million in interest expense in H1 2025[133] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures are effective[134] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[135] PART II - OTHER INFORMATION Legal Proceedings As of June 30, 2025, the company reported no litigation matters with a probable or reasonably possible material adverse outcome - As of June 30, 2025, there were no litigation matters considered probable or reasonably possible to have a material adverse outcome[54][138] Risk Factors No material changes have occurred regarding the risk factors previously disclosed in the company's 2024 annual report on Form 10-K - No material changes from the risk factors described in the 2024 annual report on Form 10-K have occurred[139] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase common stock in Q2 2025, retaining authority to repurchase an additional 12.4 million shares Issuer Purchases of Equity Securities - Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1-30, 2025 | 0 | $0.00 | | May 1-31, 2025 | 0 | $0.00 | | June 1-30, 2025 | 0 | $0.00 | | Total | 0 | $0.00 | - As of June 30, 2025, the company has authority to repurchase an additional 12,400,000 shares of its common stock[140] Other Information No directors or officers adopted, modified, or terminated any Rule 10b5-1 trading plans during the fiscal quarter ended June 30, 2025 - No directors or officers adopted, modified, or terminated any Rule 10b5-1 trading plans during Q2 2025[141] Exhibits This section indexes exhibits filed with the Form 10-Q, including Sarbanes-Oxley certifications and Inline XBRL financial data