Greetings, and welcome to the Fastenal 2022 third quarter earnings results conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Taylor Ranta Oborski of Fastenal Company. Thank you. You may begin Welcome to the Fastenal Company 2022 third quarter earnings conference call. This call will be hosted by Dan Florness, our President and Chief Executive Officer, and Holden Lewis, our Chief Financial Officer. The call will last for up to one hour and will start with a general overview of our quarterly results and operations, with the remainder of the time being open for questions and answers. Today's conference call is a proprietary Fastenal presentation and is being recorded by Fastenal. No recording, reproduction, transmission, or distribution of today's call is permitted without Fastenal's consent. This call is being audio simulcast on the Internet via the Fastenal investor relations homepage, investor.fastenal.com. A replay of the webcast will be available on the website until December 1, 2022 at midnight Central Time. As a reminder, today's conference call may include statements regarding the company's future plans and prospects. These statements are based on our current expectations, and we undertake no duty to update them. It is important to note that the company's actual results may differ materially from those anticipated. Factors that could cause actual results to differ from anticipated results are contained in the company's latest earnings release and periodic filings with the Securities and Exchange Commission, and we encourage you to review those factors carefully. I would now like to turn the call over to Mr. Dan Florness. Good morning, everybody, and thank you for joining us for our third quarter earnings call. You know, we had a good quarter. When I look at the performance of the team, I'm proud to be a member of the blue team. The 16% daily sales growth that we experienced in the quarter, we were able to translate that into 19% operating profit growth. Ultimately, we were also able to translate it into strong operating cash flow growth. We grew our cash flow 54% from the third quarter of 2021 to third quarter of 2022. An expansion of our ability to generate operating cash relative to our level of earnings. We haven't been able to lay claim to that for over a year and a half. I believe you have to go back to prior to 2021 where you can see that. It was really great execution throughout the organization. The fact that supply chains have become a bit more stable and that doesn't mean they've become easier. It just means they've become more stable and you can rely on what you're seeing in your level of safety stock. It doesn't need to be quite as deep. As far as customer demand, that was stable throughout the quarter. Now, September's 2.7% sequential growth versus August does lag the way we look at the historic pattern. History would say we should be up 3.4%. You know, the real driver of that is if you look at the storms that hit the southeastern United States, Hurricane Ian and late in the quarter and essentially pushed some business out of September and into October. The storms likely reduced our sequential DSR by about 0.5%. You can do the math on what it would be if that's added back in. We see it as stable demand. In the next bullet, touch on the fact that we are preparing for a softer 2023. I thought I'd share just some thoughts on what does that mean? Now, first off, I remember back in the fall of 2015, I believe it was a Tuesday morning, don't quote me on it, but the day before we'd had our board meeting and I learned after that board meeting that I'd been selected as the next President and CEO of Fastenal. It was a pretty tough environment for, not just the organization, but for industrial, entities in general. The next day, during the Q&A section, I was probably a little more animated than I typically am, and I commented on what I saw as the state of the economy. The next day, my wife informed me that I was on the front page of The Wall Street Journal because I opened my mouth. We're not in that kind of environment. We're not in something where I'm gonna proclaim something. We are preparing for a softer 2023, and a lot of that centers on two things. One is something that has nothing to do with 2023. If you'd have been on the call I had an hour or two hours ago with our leadership around the planet, I talked. I gave them the typical October talk, and that is we are a seasonal business. If you look at history says between September and December, our daily sales typically drop off 12%-13%. I'm going back to the time before COVID and even before some of the tariff period. I'm going back to the 2017 and 2016 and 2018 numbers. Just looking at sequential patterns, that should not be a surprise to anybody listening to this that a business that operates in northern North America, a big chunk of revenue in northern North America, after you get past Canadian Thanksgiving and get to the U.S. Thanksgiving and get to Christmas, the business slows down. We're preparing ourselves for that. When we're talking about 2023, it's really about a lot of the, you know, numbers we're seeing. Again, they're not numbers that are unique to our lens. I'm looking at industrial production, and Holden will touch on some of that here later. Looking at industrial production and what some of the forecasters are predicting. The most important feedback that we focus on is what are our regional and district leaders hearing from their customers as far as their confidence going into 2023. I have to be honest with the group, that confidence isn't strong. It's not, "Hey, the sky's falling," but the confidence is very, very cautious, and we're preparing for that type of environment. That means that you're very thoughtful about where you invest. You're very thoughtful about not getting ahead of yourself. Now, we've signed a lot of Onsites this year, and that gives us resiliency going into next year, and I'll touch on that in a second. What it means is you staff for the things you know, but you don't get ahead of yourself on staffing for the things you don't know. That's the mindset we have going into 2023, whereas a year ago and two years ago, we were staffing for both. It's just a bit of caution in the air. You know, last week, I was traveling in Europe. It's my first trip outside North America since before the pandemic. You know, there's something about, you know, human beings, even this human being, is a social creature. There's a certain energy you get and a certain rapport you can get and a level of communication intimacy you can get by meeting people in person. It was a wonderful trip. I spent some time with our folks at what we call E-Hub, which is our distribution facility up in the Netherlands. Most of our European leadership were there for that discussion. Then I traveled down to northern Italy, primarily Lombardy area of northern Italy, and met with our team there. You know, what stands out is the last time I visited this group was in fall 2017. How the group has grown just in sheer numbers, but grown in talent and business acumen was really impressive. Despite all the stuff that's gone on in Europe over the last three years. Actually, the globe, but then more specifically Europe in the last 12 months, that business is 80% bigger than what it was in 2019. That's telling the story in US dollars. If I left it in local currency, it'd be closer to 90%. I think back to when I was there, which was two years earlier, we haven't tripled in size, but we're pretty close to it. It's really a powerful story about the marketplace around the planet has identified in Fastenal what is special about Fastenal over the years. I'm glad to say that we're replicating that with our team in Europe. The one thing that is a positive, despite what it looks like in the numbers, it's a positive, and that is the pre-pandemic margin profile of the business has reemerged. Back in 2016 and 2017 and 2018, when we were really telling the story of how we thought our growth was gonna change in the future, and it was gonna be much more Onsite-driven, it changes the profile of your gross margin, but it also changes the profile of your operating expenses. We felt over time, that was a great trade-off because ultimately, it's about the level of profit and return you can generate, and it's just a faster way to grow and a better way to develop your talent and be special in the marketplace. We thought it was, but it was explaining how those dynamics would work. Mix-driven lower gross margin did occur in the quarter. Strong expense leverage also occurred, very much in line with the story we were telling five years ago. I'm pleased to say that after a period of time where our operating margin was kinda stuck within 20 or 30 basis points of 20% for a number of years. Year to date, we've been able to break out of that and move it up to 21% or actually slightly better. Very, very pleased with that. Then finally, I touched on it earlier, really impressed. You know, I'm a former CFO, so looking at our cash flow statement for the last couple of years, it was tough for Holden, it was tough for Dan, too. I'm really pleased to say when I look at the cash flow statement, that, for the first time in a, you know, quite a few quarters, six, seven quarters, I can look at the year-over-year numbers and say, "It's improving. Our cash flow is improving." I believe it has staying power because I look at the things we're doing to create it, the environment that's allowing us to create it, and the tools we're deploying to maintain it and elevate it even more. We've never been in a better position to improve our ability to generate cash. Flipping to page 4 of the flip book. Onsite signings softened a little bit during the quarter, 86. So total active Onsites is 1,567, up about 15% from a year ago. Our goal for the year of 375-400 remains intact. Given where we are, and it's in the, you know, early part of October, we expect to be in the lower end of that range. FMI Technology, we signed 5,187 weighted devices, so it's about 81 per day. A year ago, we signed 75. I'd be lying to you if I didn't say I'd like that number to be closer to 100 and at least starting with a 9. But we're, you know, getting good execution. What really stands out is what's happening with that business from the standpoint of the revenue per device, how it's expanding nicely from what we've seen. The FASTBin element of it, we're putting up really impressive numbers. One of the things I shared with our board yesterday is if you look at that discrete number of signings per day, a couple of years ago, one of those signings was a FASTBin. Today, it's 15. It's rapidly expanding throughout the organization and really impressed with the way our teams in the field have embraced the technology and the way our customers like the technology too. You look at e-commerce daily sales. Our goal for the year of 21,000-23,000 unit equivalents for FASTBin and FASTBin signings remains intact. Finally, daily sales for e-commerce rose 50%. E-commerce is an interesting one because, you know, for years, I think back to when I stepped into this role, e-commerce was about 5.5% of our sales, and it had been stuck there, and it was stuck in purgatory. Because it wasn't how we went to market. We're a service organization. We're not a catalog-centered organization or an e-com company. We're a supply chain partner. Part of it was we had to admit to ourselves that's what we are, and that's a beautiful thing. How do we play to those strengths? We've really, I believe, found a way to make this part of our business. In the quarter, we hit $5 million a day going through e-commerce, and it wasn't too many years ago that we were starting out in that journey. Really impressed with the team. Finally, our digital footprint. We've talked about that. It's really about widening the moat, illuminating supply chain for our customer and making supply chain more efficient for both ourselves and our customer. I'm pleased to say that we've grown that to 49.5% of sales in the third quarter versus 43.7% a year ago. We've talked about our plan, our goal to hit 52% of our sales running through the digital footprint sometime in 2022. That's still our goal. In fact, in the month of September, we came in at 49.9%. If you would excuse me a second, I'll just round it up and say 50% of our business is now the digital footprint, and we see that continuing to grow as we move forward. The other piece, and this is touching back, and I didn't touch on it with the e-commerce a second ago, is not just have our numbers improved, but one thing we always look at internally is our level of participation. In other words, how much is everybody doing, not just a few leaders in the organization. If I go back to 2018, 17% of our branches had more than 10% of their sales in e-commerce. Two years later, in 2020, that number had grown to 25% of our branches had more than 10% of their sales in e-commerce. I'm pleased to say in the third quarter of 2022, 52% of our branch and onsite locations, excuse me, of our branch locations had over 10% of their revenue in e-commerce. This 18% that we hit in the third quarter isn't coming from a few. It's coming from a lot of activity throughout the organization, which means it's becoming part of our DNA. That's how we found success in vending a decade ago, how we found success in onsite over the last five, six years, and what we're seeing in e-commerce today. With that, I'll turn it over to Holden. Great. Thank you, Dan. I'll start on slide five. Total and daily sales increased 16% in the third quarter of 2022. Growth did decelerate by 200 basis points from the second quarter of 2022, and September's DSR growth was below the historical norm. However, a lot of that was due to comparisons. Price contribution in the period was 110 basis points below the second quarter, which we expected. Relative to the second quarter of 2022, we also saw difficult government comps that cost us about 20 basis points. Foreign exchange cost us about 10 basis points, and the impact of Hurricane Ian on our Atlantic coastal region cost us about 20 basis points, as well as 50 basis points in September. At the same time, we experienced robust 22.6% daily growth in our manufacturing end market, 18.2% daily growth in our fastener product line, and 20.8% growth in national accounts. Regional VP feedback had a few more pockets of forward-looking caution sprinkled in. Overall, they also judge business activity in the third quarter to have been very similar to the second quarter, which we believe is a fair characterization of the period. Pricing contributed 550-580 basis points to growth in the third quarter of 2022, moderating from the second quarter as we began to grow over the pricing actions that started in the third quarter of last year. While many commodity indexes have recently fallen from their peaks, global supply chains are filled with product where costing reflects the higher commodities of a number of months ago. It will take several quarters for lower costed product to find its way to the point of use, and we continue to see supplier letters seeking to recover these costs. These variables have supported stable product price levels in the marketplace. Overall, the third quarter of 2022 reflected stable demand, stable price levels, but tough comparisons. At this time, we don't have a reason to believe that those conditions will change in the fourth quarter of 2022. However, as always, our visibility into the future is limited, and the uptick in caution that our regional VPs are receiving from their customers, while far from universal, is still notable and something we need to watch. Now to slide six. Operating margin in the third quarter of 2022 was 21%, up from 20.5% in the third quarter of 2021. Our incremental margin was 24.5%. Gross margin was 45.9% in the third quarter of 2022, down 40 basis points from the third quarter of 2021. This quarter's results had a lot of moving pieces. The first piece I'll address is price cost, which relates specifically to fasteners and was a negative 30 basis point impact on the period. Over the past 15 months, the blue team has done a remarkable job defending our profitability in an environment where fastener costs are rising as much as 30%. At this stage of the cycle, the marketplace is less receptive to further price increases, even as higher cost product is still being imported. As I indicated earlier, product pricing in the marketplace is stable, and there are tenuous signs of product inflation easing. The timing of product flows suggests that while price costs may remain negative for a couple of quarters, the magnitude is likely to moderate going forward. The second piece impacting gross margin is a write-down, this time of nitrile gloves, which pulled gross margin down 20 basis points. This is very similar to the glove write-down we had in the first quarter of 2021. Mask write-down. Mask write-down that we had in the first quarter of 2021, in that it derives from decisions that we made during the pandemic to support our customers. With the stresses of the pandemic waning, the value of our inventory relative to the market became inflated. We believe this is a discrete event specific to the third quarter. The third piece was customer product mix, which was 40 basis points dilutive, based mostly on relative growth from our national accounts and Onsite customers, which I believe everyone understands is an anticipated byproduct of our growth strategies. These three impacts were partly offset by continued strong growth in freight revenues of 30.6%, which is narrowing losses related to maintaining our captive fleet and leverage of organizational expenses as higher volumes absorbed overhead. We achieved 110 basis points of operating expense leverage in the third quarter of 2022. The largest contributor to this leverage was occupancy expenses, which reflects our branch rationalization. We also achieved leverage over employee-related costs due to primarily lower healthcare expenses and to a lesser degree, moderating annual growth and total compensation expense. We also leveraged other operating expenses with lower bad debt expense, lower general insurance costs, and higher asset sales, being only partly offset by higher selling related transportation costs, driven mostly by higher fuel prices. Putting it all together, we reported third quarter 2022 EPS of $0.50, up 17.4% from $0.42 in the third quarter of 2021. Turning to slide seven. We generated $258 million in operating cash in the third quarter of 2022, or approximately 91% of net income in the period. This still trails the conversion we might normally expect in a third quarter, reflecting the ongoing impact of steps taken with working capital to support our customers. However, this was the first time in six quarters that our conversion has improved year-over-year. As product availability in our hubs has reached our goal, we have been able to slow our inventory build, even as improvement in the supply chain has allowed us to slightly shorten domestic and import ordering cycles. These factors should improve cash conversion rates in future periods. Year-over-year, accounts receivable was up 17% on strong customer demand and an increase in the mix of larger key account customers, which tend to have longer terms. Inventories rose 19.8%, continuing to reflect on an annual basis, strong customer demand, higher inflation, and our hub inventory build. However, an improving supply chain and moderating inflation impact contributed to a sequential improvement in our days on hand from 161 days in the second quarter of 2022 to 157 days in the third quarter of 2022. This continues to trend roughly 10 days below the pre-pandemic level, despite the challenges of the last 15 months, which reflects increasing and sustainable efficiencies in how we manage our inventories. Net capital spending was $44 million in the third quarter of 2022, mostly flat with the third quarter of 2021. Year to date, net capital spending was $121 million, up 13%, due mostly to increased spending for FMI hardware, hub automation and upgrades, and IT equipment. We are reducing our 2022 net capital spending to a range of $170 million-$190 million, down from $180 million-$200 million. This reflects slightly lower FMI spending, slightly lower vehicle spending on continued availability issues, and higher asset sales. We returned cash to shareholders in the quarter in the form of $178 million in dividends and $95 million in share buybacks. From a liquidity standpoint, we finished the third quarter of 2022 with debt at 14.9% of total capital, up from 11% in the third quarter of 2021, and 13.7% in the second quarter of 2022. With that, operator, we'll turn it over to Q&A. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for your questions. Our first question has come from the line of David Manthey with Baird. Please proceed with your questions. Good morning. Hi, Dan, Holden. How you guys doing? Morning, Dave. Fine, thanks, Dave. Good. Hey, so as you're thinking about gross margin into 2023, if pricing remains flat, like you say it is right now, won't margins, gross margins that is, come under pressure as you cycle through rising cost of goods sold because of your FIFO inventory method? On slide five, you say the material prices have started to decline while market prices remain flat. I'm just trying to understand how you're thinking about gross margin here and where those lines intersect. As you know, through most of this cycle, we've been fairly flat from a price cost standpoint, and that reflected our ability to kind of match the cadence of our price increases with how we're seeing costs come through. As you pointed out, you know, we have a long supply chain and, you know, we're at the point now where on one hand, pricing levels are stable, but we're still seeing some product come through that was bought months ago that was at a higher cost in the marketplace that's impacting us. That's where the 30 basis point drag from price cost sort of evolved to in Q4. What we're also seeing is that you look at the same indices we do, right? I mean, we're starting to see that material costs, things like steel, have come off from prior peaks. What we're therefore seeing is as product is now getting on boats in Asia, and it won't be here for months and months, right? It won't flow through our supply chain. It takes time. You're starting to see that the inflation in that product has begun to come off. In fact, if I think about September, you know, September and August cost levels of product that we're purchasing was fairly flat. It's the first time that's been true in a long time. You know, we've been seeing sequential increases as things have flowed through. This is the first time that we've seen that number flatten out. I think that what that tells you is that, you know, we were a little bit shy of, you know, all of the costs in our pricing actions, where, you know, we had that impact us in Q3. As that less inflated or non-inflated product begins to work through several quarters from now, with price levels being where they are, that should all stabilize. You know, we had a 30 basis point drag in Q3. I think in Q4, perhaps in Q1, there'll still be some of that, but I don't expect it to get worse. I think it'll be basically, you know, at or better than that level. By the time you get into the middle part of next year, we're gonna see some of that product that, you know, looks like it's moderating in terms of cost coming back into our system. All right, Holden, thanks for the call. Appreciate it. Sure. Thank you. Our next question has come from the line of Jake Levinson with Melius Research. Please proceed with your questions. Good morning, everyone. Morning. Hi. Just on the non-res construction side, I know it seems like sales have slowed a little bit there, and you made some cautious comments in the release. Just curious, and I'm sure there's storm impacts in September there, but just curious what you're hearing from the field in terms of trends in that market, if there are any particular regions or verticals that seem better, of course? Yeah. You know, I think there could be a few things that are playing out in construction. One is, as you said, you know, weather probably wasn't our friend, as it relates to the most recent months, in certain parts of the southern markets. I think there's a few other things playing out, too. You know, we tend to be a little bit later in the construction cycle as opposed to being early in the construction cycle because we don't really supply a lot of the high volume, high bulk, but very low margin type of product. We tend to come in as the project is proceeding, and we sort of step in to sort of fill in, you know, spot buys that they might need for product or, you know, supply sort of folks who are involved in the later stages of the project with their, you know, with their respective vests and things of that nature. I think that there is an element of timing. As we get further away from the pandemic, and more projects that restarted coming out of it get deeper into it, I think that tends to favor us from a cycle timing standpoint. There may be some elements of timing that's in there. You know, I think the other element of it, though, is recall. You know, we have altered our branch model in certain respects. That branch model has, you know, used to be very much an open showroom for people to come in, and buy a lot of product. In many respects, we've reduced the size of that showroom and, you know, tried to get a lot of that walk-in business to go online. In many cases, that's been successful. Again, you see the e-com business is growing the way it is. A part of that is because of that. At the same time, you know, a lot of construction business tends to walk in the front door. I wouldn't be surprised if our shift to focusing on, you know, larger key accounts, which includes, by the way, larger construction accounts, I wouldn't be surprised if you know, some of the the walk-in business we might normally have entertained in our branches isn't as prevalent in our model today as it was then. I think those are probably the variables that are impacting that. The other one would be the fact that this isn't unique to this quarter or this year, but over a number of years, we've reduced the physical number of locations, and that's a place too. Yeah. That doesn't have a lot of relevancy to what we're seeing right now in the patterns. Yeah. Okay. That's helpful. I think that's it for me today. Good luck, guys. Thank you. Thanks. Thank you. Our next question has come from the line of Chris Dankert with Loop Capital Markets. Please proceed with your questions. Hey, morning, guys. Thanks for taking the question. You know, Holden, we've talked about this in the past. You know, I guess given the very high sales growth and kind of the necessary preoccupation with, you know, finding and sourcing alternative products and repricing, as some of that starts to moderate, does that mean, you know, we can refocus more on onsites and can kind of help drive some of these kind of more organic growth initiatives? You know, was that part of the productivity improvement and the SG&A leverage we saw in the quarter here, I guess? You know, the stability in the supply chain removes an incredible distraction to the entire organization because if we don't have product on the shelf in our distribution centers or we're having difficulty locating product, the fallback for everything is our branch and Onsite. They are the first line to the customer, and if a customer needs something, they will find it. The thing is, from a time standpoint, it takes them more time to source and locate than it takes to push a button on your computer and request it from your distribution center. The energy lost is there, and that energy is coming back. That puts us in a position where we can grow the business, we can grow our intensity, and we don't and we can leverage the payroll side better because you don't need to add people as fast, because all of a sudden that burden time is disappearing from your day. This is for folks at the branch and the Onsite. It does provide for a less tense environment too. Yeah. I don't think that you can underestimate the amount of energy that has been diverted over the last 15 months towards conversations with customers about raising prices, right? As opposed to conversations about increasing what we can do for them, right? How we can solve an additional or incremental levels of challenges that our customers may have. As all of that normalizes, I think that our conversations will shift from, you know, playing defense to playing offense to an even greater degree than it has been. I think that that's useful, and I think that is gonna help on the productivity side. If we weren't doing the things that we were doing to prioritize the digital footprint, to rethink kind of the structure of our physical footprint, you know, and how we prioritize our time, I think that we would've been much more challenged than we turned out to be. Thank you both so much for the color. Sure. Thank you. Our next question comes from the line of Tommy Moll with Stephens. Please proceed with your questions. Good morning, and thanks for taking my questions. Morning. Good morning. We appreciate the insight you gave from your RVPs in terms of some of the cautious comments that you've picked up there. I was curious if we could maybe go one level deeper. To what extent does that caution apply to the manufacturing end markets? Or are you picking up anything different there versus construction and maybe some of the others tied to consumer that have been weak even earlier this year? Appreciate it. Yeah. I think that the elements of manufacturing that faces capital spending or commodity markets being stronger than manufacturers that are touching consumer markets, that dynamic has persisted to some degree for the last two quarters, and it existed in September as well. That still is a thing. That hasn't changed. You know, I think that the feedback that we're getting from the RVPs. It's not universal. There's some RVPs that said, "No, things are really still good," right? I'm taking sort of a holistic consensus view from some 20-plus individuals, and not all of them are seeing weakening markets. I am seeing a few more comments from a few more people, and it's not about specific markets, it's just about the mindset and the outlook of the customers, generally speaking. You know, has gone from, you know, "Look, I'm just trying to get this massive backlog worked through," to, "Yeah, my backlog's pretty good, but I'm a little bit concerned about the orders," right? So I can't relate it to specific markets. It's been true in the consumer side. The fact that it's ticking up, I assume means that there's been some change in the customer sentiment on some level. That's probably a little bit more broad than simply the consumer side of things. Again, you know, I want to emphasize, and again, we don't have a lot of visibility. It's not universal. I mean, we're not facing a sales force and a customer set that is, you know, that has seen a major inflection. It's just the tone of some of the conversations have taken on a little bit more of a cautious tone. That's helpful. Thanks, Holden. To a more strategic question around Onsite, are we through most of the access issues that you faced at the peak of the pandemic, where you can now get the access you need to have those conversations? To the extent you are and that we do enter into a recession that spilled over into the industrial economy, should that accelerate decision-making around Onsite? Does it put a hold on a lot of those decisions or no impact really? To the extent your business is in the Americas or in Europe, access is completely there. To the extent your business is in Asia, particularly China, part of Asia, it's very restricted. Fortunately for us, 99% of our revenue is in the areas that access is really good. History has shown when you're really busy, sometimes decision processes slow down a little bit because you just don't have the time to change from a strategy standpoint. You don't have time to change that, and that can hurt the Onsites. A little bit weaker environment probably helps our ability. At the end of the day, our Onsite model is about a more efficient model for supply chain. There's a noted cost advantage from the standpoint of when we're in there, we have the tools to provide the supply chain in a way the customer can't. I think generally speaking, average or a slower environment is probably a little bit helpful. Yeah. You know, one thing to bear in mind, we just answered a question related to how we have to spend what is a limited amount of energy, right? How we're looking forward to shifting from spending a lot of energy on playing defense to being able to put a lot of energy into playing offense. It's really very similar in our customer set, right? I mean, if you have a fairly stable environment, it's not that difficult to predict and plan and take on an implementation process that you know that can be fairly involved as you're getting these things set up. If you're in an environment that's cascading, frankly, either cascading lower or cascading higher and, you know, your energy in an organization is being spent on managing those inflections and those, you know, significant changes, then your ability to spend a lot of energy on an implementation process becomes a challenge. You know, I would probably suggest that there's a great case to be made for Onsite when people are trying to be cost conscious and working capital conscious, and that certainly is the case in a downturn. It would depend on the magnitude of what you're talking about. I would say in a modest downturn, we probably are in a better position to be able to sell what we do. If you have dramatic growth or dramatic, you know, downturns, I think that our customers' energy can be moved into other things. All very helpful. I appreciate the time, and I'll turn it back. Thanks. Thank you. Thank you. Our next question has come from the line of Chris Snyder with UBS. Please proceed with your questions. Thank you. I understand the commentary that the fastener price cost drag will narrow over the next few quarters as lower unit costs flow through the P&L. I guess my question is, how should we think about fastener price into our revenue forecast for next year? Is the expectation that price will hold or that price will go down but maybe not to the same level as the cost deflation you're expecting? You know, as you know, we have, I think 55%-60% of our business today is national accounts. Those are contract pieces of business. Many of those contracts have terms and conditions in it, which, you know, when raw material costs go up, we can adjust, and when they come down, we need to adjust as well. As we get to the point where our costs are beginning to reflect less inflation, you know, and that sort of thing, then I would fully expect that there are going to be customers that we are going to have to make good on contractual terms. I would think you would see, you know, pricing decline in those circumstances. Now, bear in mind, of course. Bear in mind, of course, that even within contract relationships, there's spot buys and things like that that aren't gonna be as reactive to the contract terms. Of course, we do have a significant amount of business that isn't necessarily contract, that may not be as responsive either. You know, I think there certainly will be cases. I think our responsibility is to make sure that we reduce price as we see our costs coming down. That will be our goal. Have the same conversations with our customers that we had on the way up. No, we really appreciate all that color. Holden, to prior commentary you made about, I think you said unit costs or the price, I guess, you guys are paying to the producers, flattened out in August and September, you know, really for the first time since the pandemic. You know, I guess my question is that? Are fasteners down and everything else is still kind of inching higher? Or is it kind of really across the board, costs are flattening out? I just ask again, it just feels like fasteners are on a bit different of a cost kind of trajectory. There's not a meaningful difference at this stage of the game, whether it be fasteners or other things. It's not. There's not a meaningful delta between those things. You know, bear something in mind. You know, I think that we're at a point where we're seeing a little bit of a change in the market, but it's very early in. We actually are still. You know, when I talk about how the boats are still filled with products that are fairly expensive from price levels that existed months ago, we're still receiving letters from suppliers that are asking for price increases on certain products because of that FIFO effect on their own supply chains, right? It's an exciting change, I suppose, but we have to see some strength of these trends before we can, you know, start thinking about what actions need to be taken. Part of it. Thanks. Chris. Stems from, you know, what was the ultimate cause of the inflation. If you think of the product. I'll speak to fasteners, but a lot of it could be true to anything. There's a cost of the underlying steel. There's a cost of the energy to convert that underlying steel to the finished product. As you know, that cost of that energy has only gone up, and that's not coming down. The next piece is the cost of the human capital, the human resources to be involved in that endeavor of converting it, of transporting it, of running it through distribution. That has appreciated as well, and that's not coming down. Once a cost element there increases, it has incredible sticking power. The third one is the physical cost of moving it. That cost has moderated. I mean, it had gone ridiculously high. It has moderated. I don't see that coming back. If you look at those four pieces, there's really one of the four that you can see that you can, you know, just looking at it mechanically and see, yeah, there's opportunity for that in the future. But the cost of the energy, the cost of the people, and the cost to move it, those are what they are, and they really don't deflate, per se. Yeah. No. No, really appreciate that. That was kind of really the genesis of the question on fasteners 'cause it just feels like, you know, if you look at those cost buckets, the one that is deflating the most is metal, which, you know, fasteners are more exposed to them than the other product lines. But I really appreciate all that color. Thank you. Our next question has come from the line of Ken Newman with KeyBanc Capital Markets. Please proceed with your questions. Hey, good morning, guys. Morning. You know, I just had a follow-up question on the non-res side of the business. You know, I appreciate that the operating strategy for that business may be a bit different versus prior cycles, but you know, is it fair to assume that the 500... call it 565 basis points of price that you took in the quarter, is that equally weighted across all your sort of end markets? I guess I'm ultimately trying to get to whether volumes and non-res were down, call it 4% or 5% in September, or is that not really a fair assessment? Yeah. I guess the frank answer is I don't know the answer to that question. We haven't broken down price cost elements by end market. So I just don't have a good answer for you. But there's nothing that would lead us intuitively to say there'd be a difference. Yeah. I mean, a fastener is made of the same steel, whether you're selling it into a construction application or a manufacturing application. Same, same underlying raw material, right? Right. Whether or not the pricing behavior in those two markets are the same or different, I just don't have a good answer for you on that. Okay. For my follow-up here, you know, the Onsite and the FMI growth looked pretty solid in the quarter. You know, as you kind of think about past down cycles and just elevated levels of uncertainty, you know, is there a change in how you think about the rate of deceleration, you know, in the macro, whether it's, you know, PMI or your industrial production versus, you know, the rate of change in Onsite signings? Is that different from prior cycles, you think, because the value prop is different? Or would you expect kind of similar versus past cycles? Well, you know, if you think about it historically, we could look at our established business and our business that was coming from new branch openings. I'm going back 15, 20 years when I make this comment. You had this constant wave of pushing, but the We still sell into a cyclical end market. Where you have a meaningful presence in a market, you get headwind, and it's how much of that headwind is offset by the things you're doing. Onsite is a cousin to branch openings from the standpoint of I feel better about 2023, the fact that we've signed a whole bunch of Onsites in the first nine months of this year. 'Cause the customer activity at our existing branches, at our existing onsites is gonna be impacted by the economic cycle. That's just the reality. If we have a customer that's spending $10,000 with us and it goes to $11,000. If it goes to $9,000. It's how many new customers, how many expanded relationships are you adding? I take a lot of comfort in the fact that we have a lot of pent-up growth, market share gains in our hopper right now because of all those onsites we signed and because of the vending and the FMI devices that we've signed. It gives you incredible ability to take market share. When we're looking at it internally, we always look at it from the standpoint, okay, here's our growth. How much is the market giving to us, and how much are we taking? The number you focus on is how much are you taking and what are you doing to take? Then the number that's how much is being given, that's what you use to pull levers to manage your business. Because those are things that impact you. The other is things you impact. I hope that's helpful. I might. You know, if you think about our value prop hasn't changed that much, right? It's always been about getting really well-trained people close to the customer and empowering them to make, you know, great decisions to solve customer issues. That has been the proposition. That remains the proposition. The only thing that's changed is the tools we have at our disposal to achieve that have gotten better and more sophisticated and advanced. The value proposition, I don't think has changed. One thing that does excite me is as you do go Onsite, as you do put in those bins, not only is there a greater ability to add value through data that I think becomes even more important when people are looking for how to become more efficient themselves, but it also ensures that we always have a reason to be there. You know, that Onsite might be down 20% because of the market, but we're still there every day, and we're looking for other opportunities to expand our ability to gain more business. You know, when we're primarily branch-driven, you know, we would have to gain entrance to it. There might be people that are saying, "You know, we don't have time right now. We're managing this." Now we're there every day, filling those bins that are part of the digital footprint and the vending machines and even Onsite. I think that that's going to make our ability to gain market share resilient regardless of cycles. To that end, do you think about when we're going through the pandemic, you know, there's a number of reasons why we found success. One, we just have a team that's really good at finding stuff and are really focused on quality. People could buy stuff from us, and they knew it was what it was, and they could trust that they were gonna get it. Because of our vending footprint, because of all the bin stocks we do, because of all those things that we've been doing for years, to Holden's point about access granted, we were getting into customers' facilities. One of the reasons we closed the front door of all of our branches, we didn't wanna be the weak link. If this customer is shutting down access to their building, but they're letting us in, well, our building becomes an extension of theirs, and we shut down access to that too. It puts us in a unique spot of we still get to come in and get engaged, as opposed to being, you know, an internet connection away or a phone call away. Very helpful color. Appreciate it. Thanks. Thank you. Our next question has come from the line of Nigel Coe with Wolfe Research. Please proceed with your questions. Thanks. Good morning, hope all is well. At the risk of, you know, beating a dead horse here, I do wanna go back to the non-res, 'cause that's a topic of interest for a lot of investors here. I get the fact that manufacturing is benefiting from the, you know, the FMI initiatives and, you know, the vending onsite and all that. Whereas you clearly stated that non-res is much more around stores. I think the classification makes sense, but is there anything unusual happening in that non-res category in terms of, I don't know, projects getting delayed or moving to the right? I don't know, customers buying less, you know, anything unusual to call out there over and above what you just described? I don't think so. You know, but again, I mean, given some of the things that I described being perhaps a little bit later in the cycle in terms of where we hit our sweet spot in construction and some of the changes we made, I'm just not sure we're a great proxy for the overall, you know, non-res market trends, right? You know, when I query the RVPs, nothing particularly special has come out of the discussion around non-res for us. No, that's very clear. Just wanna make sure that's the case. When you say preparing for a softer, you know, 2023 into the back half of the year perhaps, what does that actually mean? I understand, you know, maybe not hiring for, you know, growth, but are you actively in the process now of managing down inventories, managing, you know, sort of discretionary costs? Are we in that phase yet? And any comments you have on 4Q gross margins, Holden, would be appreciated. Nigel, as far as the, we're always in the phase of managing down costs. We're always in the phase of looking at everything and rationalizing everything every day. That just keeps us agile and fresh. What it means is sometimes it's reminding everybody. You know, we've been through. You know, you think of the last, you know, four or five years, you had we were impacted very directly by all the tariffs a few years ago. We, along with everybody else on the planet, was impacted by COVID. We, along with everybody else on the planet, were impacted by supply chains being just snarled up. The only benefit we had was we're better at unsnarling that than anybody else. Part of that we were willing to do just with hard work. Some of that we were willing to do 'cause we just know a lot of manufacturers, a lot of potential suppliers. Part of it we were willing to do 'cause we were willing to use our balance sheet. You think back to the spring of 2020, I remember some of the POs we were cutting for masks. I sleep really well at night. There were a few nights where I'm kinda like, "Oh, my God." As we went forward, if it's taken an extra 30 or 60 days to get product in, all of a sudden we're adding $250 million of inventory 'cause that's just mathematically what it takes. 'Cause at the end of the day, we have a covenant with our customer. We are their supply chain partner, and they'll get it from us, and they trust us to do that. Now, we've been in the process for some months of looking at that and saying, "Okay, we now can rely on supply chains in a way we couldn't 6, 9, 12 months ago, so we can start dialing that safety stock down." What you're seeing in cash flow this quarter is just the outcome of that. We aren't squeezing the balance sheet and squeezing inventory because of what we're thinking for 2023. We're removing layers of safety stock that we had added over the last few years, and we're slowly removing. You know, you close a bunch of locations and you change your inventory layout. We had a lot of inventory that was positioned around the company, because we had a front room, that we slowly are working our way out of. Those two things is what gives me confidence on our ability to generate cash flow. The idea of preparing for 2023 is reminding everybody, "You know what? This isn't the time we're giving raises. This isn't the time we're adding things that are discretionary." This is the time where we're saying to our field personnel, "We have you know close to 300 on-sites we've signed. We have locations that are growing. We need to staff those." Our head count became disproportionately out of kilter during the last 3 years because our recruiting model, a big chunk of the way we recruit is we go into 2-year technical colleges and 4-year state colleges, and we say to young people, "Come join us. Work 15, 20 hours a week. Let's get to know each other." So that when they graduate, they might decide that industrial distribution is right for them, and we might decide they're right for us. That's how we add people. We still haven't corrected that mix. We're gonna be adding people in the field, but it's gonna be disproportionate to part-time and folks to staff our Onsite. Part of when you're looking at a year like 2023 could be, based on the tone out there, you just remind people to what we're about. With regards to Q4, I'll just give you a sense of sort of how I see the moving pieces. You know, product and customer mix is gonna continue to be a drag. Is it the same 40 basis points as it was in Q3, or is it 50 basis points, you know? Or whatever. That'll be determined by the relative growth of national account versus non-national account, the relative growth of fasteners versus non-fasteners. You know, I don't expect that 40 basis points to be less. It could be slightly more. I don't expect the write-down, of course. I don't expect price cost to get worse. It could get a little bit better, frankly, than what we saw in the third quarter. You know, from a seasonal standpoint, it's not unusual for the fourth quarter to be 30 basis points lower than the third quarter, and I think that's reasonable. I think there'll be a little bit of a challenge on the operating expenses. In some areas, we had some difficult comps we're gonna come up against in fourth quarter. You know, run all that math together, it is, you know. I think normally you'd expect seasonality to play through for about 30 basis points. I think when you get all those pluses and minuses all blended together, it probably comes in down 20-40 kind of range. The, uh- Right. We're about two minutes to the hour, so I'll just share a couple closing thoughts. One is, you know, Holden talked briefly here about fourth quarter and but also about some of the expense components that are fixed or that are variable. We're in a position where a lot more of our expenses are variable than we've ever been in for the last 50-plus years of our existence. That couldn't be more true than what we see today. If you take a step back. Go read our proxy and you'll see how people in Fastenal are paid. There's a lot of incentive comp at the branch level, at the support level, at the distribution level, throughout the organization. A piece of that's related to sales and gross profit growth. A piece of that's related to expense management. A piece of that is related to earnings growth. It's no secret that for the year, we'll have pretty good earnings growth. If you think a chunk, a big chunk of folks are paid off that earnings growth, I think, and I'll put a shout-out to Dave Manthey, he coined this phrase, I think 15, 18 years ago, about the shock absorbers in the Fastenal expense model. Those shock absorbers, they're fully flexed right now. What that means is, unfortunately, as an employee, it means you you'll probably get some contraction in pay, and I'm an employee, so that's the unfortunate. The fortunate thing is we had a pretty good 2022, but it puts us in a position to invest to grow the business in the future without cutting any muscle. There's some things that just naturally contract if earnings growth contracts. It puts us in a great position to do the thing that we've proven for decades we can do quite well, and that's take market share. Thanks, everybody. Have a good day. Thank you. Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.