Greetings and welcome to the Fastenal Q2 2025 earnings conference call and webcast. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question-and-answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. We ask that you please ask one question and one follow-up, then return to the queue. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Dre Schreiber. Please go ahead, Dre. Welcome to the Fastenal Company 2025 second quarter earnings conference call. This call will be hosted by Dan Florness, our Chief Executive Officer, Jeff Watts, our President and Chief Sales Officer, and Sheryl Lisowski, our Interim Chief Financial Officer, Chief Accounting Officer, and Treasurer. 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 September 1st, 2025, 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. Jeff Watts. Thank you and good morning, everyone. Thanks for joining us today. My name is Jeff Watts, President and CSO, and while I've listened to this call for decades and more recently sat on the call the last few quarters, this is my first time addressing you, and I'm excited to kick off our second quarter update today. I'd like to begin by extending my congratulations to the Fastenal team on delivering just a very strong quarter and exceeding the quarterly result of over $2 billion in revenue for the first time in our company's history. That's a significant achievement, and I'd like to express my appreciation to everyone across the organization for their contributions. Now, jumping into it, sales in the second quarter increased by 8.6%, marking our highest daily growth since early 2023. When I think about the growth this quarter, you know, market conditions, they haven't really helped us and remained sluggish. We did get some lift from price of about 140-170 basis points, which Sheryl will be addressing in more detail later in the deck. What I'm really proud of the team for is their push and momentum in market share gains and contract signings. You know, that momentum has really built up the belief and the execution of our strategic plan, the one that we shared at our Investor Day presentation back in March. The activities and actions that we've taken better align our field and corporate team's focus on something that our late founder, Bob Kierlin, taught us: the importance of a common goal. You know, Bob always emphasized that when everyone in the company is focused on a shared purpose, it drives unity and prevents division among groups and departments. It also drives results, and that's what we're focused on, with an emphasis on stronger, more embedded customer relationships, which reflect our strategic intent to be more than just a distributor. We're a supply chain partner embedded at the point of use, delivering measurable value to our customers. I think this shows in our contract signings. Since implementing these changes back in the beginning of 2023, our contract growth has increased from 4% in the 2022-2023 timeframe to 11.2% last year, and that momentum has continued as we move into 2025. In Q2, we saw 84 contract signings, well ahead of the last two quarters, and honestly, outperforming our expectations considering the current market conditions. Contract customer sales for the quarter increased 11% and now represent 73.2% of our revenues, up from 71.2% in the previous year. Now, moving on to slide four and looking at our customer site performance. Starting with revenue from sites generating $10,000 or more per month, these increased 11.6% in the quarter, accompanied by a nearly 7% rise in the number of such sites. This change was primarily influenced by the growth in our onsite-like sites, or those generating $50,000 or more per month, which grew by 12.4% and showed revenue growth of 14.5%. Monthly sales per customer site increased in all customer categories, with the total sales per site increasing by 17.7% to $6,790 per month. We did see a decline in the number of accounts in our under $5,000, which did contribute to the average increase in revenue per site in this category. When digging further, almost all of these declines were in the under 500 customers, with the bulk actually coming from the customer due less than $100 per month. Now, this decline was expected as, you know, we continue to drive our focus on our larger sites, but we also look to relaunch fastenal.com later in 2025, and this is being done to really help address the spot-buy needs of all of our customers, including the ones in the smaller categories. Our goal has always been the same. Our goal is to grow in all of our categories. One number that does stand out to me in our growth is the non-manufacturing sites in the $50,000 plus category. Now, this group's revenue has increased 30% year- over- year, and the site count has increased over 18%. Now, this is, we believe, as a result of our realignment of our sales teams to work more closely with the regions and the RVPs, from the government teams to the safety teams. We're driving more business together in areas, you know, we may have missed in the past, especially in the non-manufacturing sector. Again, some encouraging numbers. When you look at the slide and the results on slide four, you know, we use these to gauge our quarterly performance, but in the field, you know, we go down to the month. What's exciting is when we look at our trends on a more granular basis. As we move throughout the quarter, growth has continued to increase in all categories 5,000 and above, most notably our site counts, which were all double-digit growth in June. Again, some very exciting numbers there. Overall, for the quarter, a very nice job from the team, not only on the sales side, but also on how we're continuing to show progress on implementing our strategy across the organization. Again, to the team, thank you very much, and I'll now pass it over to Dan. Thanks, Jeff, and good morning, everybody. You know, when I think back, three years ago, in the summer of 2022, we were having a good year. As we had re-emerged from COVID, some things were going on. There was a lot of supply chain constraints, a lot of chaotic environment, a bit of inflation. We were putting up really strong numbers, but in all frankness, it was not a year that felt good. I have known Jeff for 30 years, or close to 30 years, and we were having a lot of discussions about what we are seeing. I was having a lot of discussions with other leaders in the organization. What did not feel good was, it did not feel like the organization was aligned. Even worse than that, it felt like we had lost some humility in the organization. In that, over the prior several years. Maybe it was masked a little bit because of COVID, maybe the fact that we were not, you know, keeping each other in check, because in life, we all need life partners, whether it is business partners or, in my case, my wife, who tells you when you are full of it once in a while and keeps us all humble. It felt like we had lost some of it. We made some change. We started making some changes late in 2022, and that continued as we moved into 2023. I asked Jeff to step out of his existing role and step into the Chief Sales Officer role. I challenged him on some ways to think about the sales side of the organization. True to his nature, he took that and, with a really strong team, asked some folks to step in some different roles. I'm really pleased to say that the changes they made felt good at the time, and they feel even better now as we're going through 2025. Last fall, as I mentioned earlier, we named Jeff Watts President and reshuffled the deck a little bit more. Again, really, really pleased to see the outcome of those changes. Late last year, in our annual leadership meeting, I shared with a few folks, yeah, Jeff's going to open the earnings call in July, so it'd make it a lot easier for him if we could put up a strong quarter, because it makes the call just a lot easier. It makes the Q&A a lot easier. True to form, the team rose to the occasion and put up an excellent quarter, and I'm proud of the entire organization. My only comments to Jeff and also to Sheryl coming into this call were, make sure you slow down when you talk. Enjoy it, and just tell our story. On page four, Jeff shared some stats on that page. We have regular calls throughout the year with our district leadership, as well as our regional leadership. In those district calls, we lead into it or give them some instruction ahead of time to talk about how the organization helps you, what helps you the most that we do, what hinders you the most in what we do in supporting you and, quite frankly, slowing you down. It is a great way to challenge both directions in the firm, inside and out. We provide these types of statistics that you see on page four. One thing that you'd see if you were inside the four walls of the organization is that the closer we get to the action, the shorter the timeframe. If you're having a conversation with a district manager, we look at this, and Jeff mentioned it. We look at these customer site performance statistics on a monthly basis. In our quarterly calls, we talk about it on a quarterly basis because we think it's more relevant to the discussion. As we did in our March Investor Day and what I expect we'll do in our annual filings, is we'll talk about it on an annual basis to really talk about what it means. Regardless of the timeframe you're looking at, it's about what are the trends in the business. What are driving the trends, and how much of that is coming from the tide is rising. We're rising faster or not as fast, or the tide is stagnant or dropping, but we're performing. What I'm really pleased about this quarter is our numbers didn't change as we moved through 2025 because the tide is rising. I will say it has stabilized in our business. Last year, the last two years, quite frankly, you know, in the fall of 2022, the PMI really dropped, and it's been sub 50 pretty much ever since, except a couple of months. What's changed is it's stabilized, but our execution has dramatically changed, and I feel like the organization is really aligned. I believe it shines through on page four of our flipbook. Going to page five, Jeff already touched on the daily sales rate growth rate. For the quarter, we came in at $0.29. EPS rose 12.7% from a year ago. One of the. Under-the-hood stories within the quarter. It is a change we made in mid-2024 to undo a decision that had been in the works for a few years, and that related to our stocking and distribution of fasteners. Where it is really wide. You know, probably the person I have learned from the most. I mean, learned a ton from Bob Kierlin, learned a ton from the Fastenal organization. One of the persons I have learned the most from over my career at Fastenal is Nick Lundquist. And when Nick led supply chain and distribution, he always had a comment. He felt their job was to keep the trucks full. And what that meant is support the branch and onsite network in any way you can to give them hours in the day. We pulled away from that after Nick had stepped out of that role for a few years, and we were not stocking as deep as we should have been. Our supply chain team really dug into it and studied the branch and onsite activity. We began ramping up our investments where we get a nice return. We did that in the tail end of 2024, coming into 2025. This morning on our call with our regional leaders, I really challenged that group to understand what that has done to your business. Not just in revenue or margin, but in effort. As you look at how many POs have dropped, it gives hours in the day to our folks in the field, and a huge, huge win. Moving down the P&L, I am pleased to say we leveraged our SG&A. As a consequence, put up 21% operating margin for the quarter. The only component of SG&A that we did not lever was bonus and commission. I think it is Dave Manthey, a number of years ago, used the phrase shock absorbers in our system. You know, on the way down, what helps us preserve our P&L and, frankly, preserve our ability to invest in the business and our customers going forward is the fact that everybody in the organization takes it on the chin when our performance suffers. In 2023 and 2024, there were a lot of people in Fastenal that took pretty extreme pay cuts. I'm pleased to say in the quarter, one of the things that ate away at some of our leverage was the fact that our bonus pools expanded nicely, and we were able to celebrate and reward the team for what they've been doing the last two years. If I think about that operating margin, I'm really pleased to say our incremental margin for the quarter came in exactly at 30%. Again, a strong showing. As you saw, end of last week, we announced dividend payable in the third quarter of $0.22. We remain confident in our ability to generate cash flow to support the business and to support the dividend that we expanded in 2025. Going to page six, the FMI technology, a little softer that we're seeing. If I look at it, you know, in 2025, the contrast of 2024. Is in 2024, we were hitting hard with converting a lot of existing customers. With the FMI technology related to RFID, where you have a Kanban system, we're implementing that. That was extremely successful in 2024. It reflected both new customer signings, but also, again, the conversion of existing customers. That softened a little bit as we looked at this quarter. Even our vending softened a little bit. Part of that is a function of how many we converted last year. Our holy grail has always been to keep that number above 100 a day. In the quarter, we were at 101. There's a lot of conversations going on around that little thing called tariffs. There's a finite amount of energy in the room, and sometimes something's got to give. I think what gave this quarter is all those discussions meant there were fewer discussions about expanding the FMI footprint. Our challenge to our team is we have to keep moving that forward. Despite all that, we ended the quarter with just over 132,000 devices installed at the equivalent weighted devices, 132,000 installed across the planet. That's almost an 11% increase in what we had at the end of June last year. That puts our FMI at 44.1% of sales. We believe ultimately that number can get to about 65%, where there's enough repetition with a customer that's large enough where you can install that investment. Two years ago, that number was in the 30s. Continue to see that expand nicely. Because of the number being down slightly, we see the signings for the year coming in somewhere between 25,000 and 26,000 MEUs. Again, a great number, a number we would have killed for not too many years ago. So successful. We want to get that number up a little bit higher, not just above 100, but a little bit deeper into the hundreds. E-business grew 13.5%. I'm pleased to say for the first time ever, we broke 30% of sales in the, as we exited the quarter, for the quarter. Excellent performance there. I believe we have a lot of runway on that piece as we continue to improve our e-commerce capabilities. Finally, if you take those two and combine them, 61% of our sales fell under our digital footprint. That number was in the mid-50s two years ago. Our goal is to exit the year somewhere between 63% and 64%. Page seven is a new one for the group. Frankly, it's a new one for us. Six months ago. Kevin Fitzgerald was involved in our pricing efforts back in 2018 when some of the initial tariffs were going on. At the time, we shut down our IT group for three months and built a system to track this and be in a position where we could convey insightful information to our customer about what we're seeing and, more importantly, what to expect and what that might mean to give them time and options to pivot on their own supply chain. When the tariff activity started ramping up, I said to Kevin, "Can you start producing a video for the field to convey. Order to the chaos and try to simplify it as much as you can." What you are seeing here is, in essence, a rolled-up version of the slide deck that Kevin uses in those videos. I think he has produced 13 or 14 to date. It seems like about every other Friday, there is a new video coming out. Maybe it is more frequently than that. What we do here is try to simplify it for the field, but also for the folks in supply chain. When you start looking at that fourth column where it says, "Is it eligible for duty drawback?" that is a really important distinction because we bring product into North America for North America. If all of a sudden there's a 25% or a 10% or a 15% or a whatever percent tariff being applied on product and you bring it into the U.S. and then you subsequently move it into Canada or Mexico, you've created an inefficient supply chain for your customer, even if it is the most efficient way to move the product. As we move through 2025, we've been redirecting more and more product to come directly into Canada where the economics justify it. This is primarily on the fastener side. The same thing into Mexico. The downside is it is a more expensive supply chain because you do spend, when you're breaking down shipments and you're sending them into multiple ports, it is more expensive to go into the West Coast of Canada with. An import for just Canada than it would be to bring it into the U.S. But it's less than 25%. 45, or 50%. And so you make that decision, but you convey that to your customer. What we're doing, because our covenant is to manage your supply chain. So hopefully this brings some clarity to what we approach with. Tariffs and how we convey it. Our goal isn't to be the best organization at adjusting pricing. Our goal is to be the best organization. At managing supply chain for our customer and being agile to benefit them. And their ultimate customers downstream. On the most efficient supply chain to get them what they need when they need it. With that, I'll turn it over to Sheryl. Thanks, Dan. And good morning, everyone. Turning to slide eight. Sales in the second quarter of 2025 were up 8.6%. That's our strongest daily sales rate since the first quarter of 2023. As Jeff mentioned, it's also our first quarter above $2 billion in sales. Feedback from the regional leadership continues to reflect sluggish end market demand despite generally favorable outlooks. Trade policy continues to create some caution. Notwithstanding this uncertainty, we did not detect any meaningful pre-buying ahead of tariffs. In the absence of much external help, the improvement in our sales reflects two other variables. First, even as the market has stabilized, our comparisons have gotten easier, particularly in the cyclical parts of our business. This factor helped produce our second quarter of growth for fasteners since the first quarter of 2023 and acceleration in manufacturing end markets. Second, contributions from our strong contract signings over the past six quarters continue to build. We continue to experience a healthy pace and mix of signings in the second quarter of 2025, and our total national, regional, and government contracts have grown at a double-digit rate for 15 consecutive months. The quarterly sales growth rate is a fair representation of our performance, and we did see acceleration through the period. It was a solid self-help-driven result in a soft market. The pricing outlook also warrants some discussion. Year to date, significant tariffs have been applied to products from China as well as steel, including steel-derived products like fasteners on a global basis. We continue our long-term trend on diversifying our supply chain where possible to the size and timing of our suppliers' pricing actions, and we added some inventory to our own balance sheet. That said, supply chains have gotten more expensive, and a part of our response over time will be incremental pricing. We have been proactively engaging with our customers for several months. During the second quarter, we implemented three separate pricing actions which aimed to contribute 3%-4% of price by the end of the second quarter of 2025. The phased approach to this rollout resulted in 140-170 basis points of additional impact in the second quarter, with momentum building as we ended the quarter. Additional pricing actions will be necessary in the second half of 2025, with the potential to double the impact of pricing, depending upon where the deferred tariffs ultimately settle and the pace and execution of our actions. We are encouraged by the easier comparisons, the improved sentiment, and particularly our internal momentum. That said, we have limited visibility and share our customers' uncertainty over how current trade policy may impact demand over the course of 2025. However, Fastenal has historically been able to win market share during periods of disruption on the strength of our nimble sales, our frugal and adaptive culture, and the weight of the technologies and global supply chain resources we can apply to finding solutions to customer challenges. This is our expectation in the current environment. Moving on to slide nine. Operating margin in the second quarter of 2025 was 21%, up 80 basis points year- over- year. Gross margin in the second quarter of 2025 was 45.3%, up 20 basis points from the year-ago period. The improvement was driven by price cost being slightly favorable, margin on fastener sales improving due to the fastener expansion project, and improvements related to other supplier-focused initiatives. These improvements were partially offset by customer and product mix dilution, higher import duty fees, and higher fleet and third-party transportation cost. Customer and supplier incentives were also a slight drag. We anticipate our gross margin for 2025 will be relatively flat with 2024. This will be dependent upon our effectiveness in managing price cost, and the degree of macro improvement will also influence the scenario. SG&A was 24.4% of sales in the second quarter of 2025, down from 24.9% from the year-ago period. Employee-related expenses increased faster than the rate of growth in sales, largely due to the reset of bonus and commission programs due to improved financial performance. This increase was partially offset by leverage achieved in all other SG&A costs. We continue to invest in key areas of our business to support growth while managing other costs more tightly to reflect the sluggish business conditions. Putting it all together, we reported first quarter 2025 EPS of $0.29, up from $0.25 in the second quarter of 2024. Reminder, we executed a two-for-one stock split in May of 2025. The prior year EPS has been adjusted for this change. Now turning to slide 10, we generated $279 million in operating cash in the second quarter of 2025, or 84.4% of net income. Despite our investment in inventory, cash generation was above traditional second quarter levels. The five-year average from 2020 to 2024 was 83.7%. We remain comfortable with the cash generation of our model and continue to carry a conservatively capitalized balance sheet with quarter-end debt being 5.7% of total capital. Accounts receivable were up 9.9%, reflecting sales growth, relatively faster growth to larger customers that tend to carry longer terms, and an uptick in quarter-end deferred payments from our customers. Inventories were up 14.7%, similar to the preceding quarter. We have increased inventory as part of our effort to improve product availability in our selling locations and improve picking efficiencies in our hubs. We have added stock to support customer growth, and we accelerated some inventory schedules for future delivery into current periods ahead of potential tariffs. Inventory growth may remain elevated in 2025 as we continue to navigate tariffs and as more inflation builds in. Accounts payable were up 9.1%, reflecting the increase in inventories. Net capital spending in the second quarter of 2025 was $64.3 million, up from $52.6 million in the second quarter of 2024. This increase is consistent with our expectations for the full year, where we anticipate capital spending in a range of $250 million-$270 million, up from $214 million in 2024. This increase is from higher FMI device spending, higher IT spending, which includes projects aimed at developing additional digital capabilities and distribution center outlays to reflect spending on our Utah and Atlanta hubs and automated picking additions across our hub network. With that, Operator, we will turn it over to begin the Q&A. Thank you. Now the conducting of question and answer session. If you would like to be placed in the question queue, please press star one on your telephone keypad. As a reminder, we ask you to please ask one question, one follow-up, then return to the queue. Our first question today is coming from David Manthey from Baird. Your line is now live. Thank you. Yeah, good morning, everyone. My first question, I am hoping to better understand contribution margins with the 10,000-plus per month customers over time. Could you discuss the evolution of profitability as those relationships mature and grow? Dave, if you think about the Onsite business that we've talked about in the past, that's really a good proxy for the contribution margins from the 50K plus. If you take that down a step and you go to the 10K plus, it aligns actually a lot closer with the historical company. Because what's different there is the gross margin is not the, can challenge the company number a little bit, not too much, but a little bit. The SG&A leverage is much better because one of the things that you've seen over the last five, six years, actually over the last decade, as we rationalized our branch network. It morphed a lot of business, both to Onsite and also to large customers served out of a branch, because we're indifferent to how it gets served. We wanted the local team to make the best decision. What you saw was an incredible leaning down of our operating expenses. The biggest two drivers of that were people-centered and occupancy-centered. Those were the two biggest drivers that were variable. Contribution margin actually for a lot of the 10K plus customers looks a lot like the company. Intuitively, the best way to prove that out is that 10K plus group is almost 80% of sales. It really shines through a lot of the underlying organization. Hope that answered your question. Yeah. Yeah. Thank you. That does. When you discuss the inventory investment, you say you expect that to pay off in the back half. Does that imply that you're expecting a higher mix of fasteners or not? Maybe you could just help clarify that statement. I would read that a little bit differently. If we were not crisp with our press release, that's on me. It's been paying off in the first half. It's been very attractive from the standpoint. The revenue and the gross profit dollars in and of itself is really attractive. The nice piece that's harder to measure is what does that freed-up time mean. As far as what our teams can do. I think a lot of it shines through, and Jeff touched on that when he looked at that page of the customer categories and the success we're seeing. If I have more hours in the day, more hours in the week to engage with my customer, there's always more ways we can help. It's just sometimes you don't have time to get to that third thing or fourth thing. Freeing up that cutting appeal has really helped. It's been providing an attractive return. Right out of the chute. What happens as we move into the latter half of this year and into 2025? There is some rationalization we can do because by deepening that inventory in our distribution network. One challenge we always put in front of our supply chain team is, because they're aligned with our distribution centers, historically, they could sometimes get caught in that trap of, they would look at our hub inventory, our hub supply chain, and feel really good on what our fulfillment is out of distribution and how many days of inventory we have on hand. A great supply chain leader looks at it from the standpoint, "What do we have in inventory. All the way from our supplier to the customer and all the stopping points in between? If we take $10 million out of inventory and it means we end up with $10 million in the branch network or $15 million in the branch network and we're cutting a lot of POs, that's not a smart decision. As we go through the second half of 2025 and into 2026, some of that inventory we've added, we're slowly raking that out of distribution. We believe the returns will improve. On that piece, when we talk about the latter half of 2025 and into 2026, we're more referring to that. We're getting the return on that inventory right now. That's great. Thanks a lot, Dan. Thanks, Dave. Thank you. Next question is coming from Ryan Merkel from William Blair. He's now live. Hey, everyone. Congrats on the quarter. Thanks, Ryan. Let me follow up on Dave's question. Should we expect sort of flattish gross margins year over year in the second half? Can you just unpack why deeper inventory of fasteners is helping your margins? Are you getting better margins on fasteners, or do you expect the mix of fasteners to get better and that is what helps the margins? I'll take the last part of that, but then I'll ask Sheryl to answer the first part of that. Yeah. As I mentioned in my commentary, we are expecting our margin for 2025 to remain essentially flat with 2024. If you think of that fastener expansion, the bigger part of it is not the fact that we're buying it better, although we probably are in 80% of the cases. The reason I say that. The 80%, I qualify it at all, is the fact that we went really deep in our analysis, and we looked at some small levels of sales from a dollar standpoint and from the number of branches actually selling it in a 12-month period perspective. So we went really deep and wide. Excuse me. We went really wide. What it does do, though, is there's a lot more MRO fastener business in that mix. Because the stuff that we're buying on a regular basis, whether we're sourcing that through our distribution and supply chain group or locally at the branch or on-site, that's a known spend. And our stocking level on planned spend didn't change so much. It was on unplanned spend. And so that actually has two benefits to it when you have it on the shelf. One is you know your cost quickly. You can convey a sell price to your customer quickly. Part of the win is a little extra revenue of that type of product. That product, in and of itself, carries a better gross margin profile because it is a spot buy versus a planned buy. The reason that needs a little bit better gross margin profile is it is a lot of work. It takes a lot of labor. Now, if we can put a little bit of that product on the shelf and leverage the labor up a little bit and get a little bit more of those sales, the mix helps us run. Okay. That makes sense. My second question is just on the sales outlook. The contract signings were really impressive. I guess my question is, Dan, or even Jeff, what's your confidence level in achieving double-digit sales growth in the second half of 2025? Because it seems like the pipeline is there, and then Sheryl talked about more pricing. Yeah. I think. When I look through it and I look at our pipeline today, there's no reason for me to say that we won't be in that category of double-digit moving forward for the rest of the year. Everything is becoming very strong across every category we have, especially in our pipeline of contracts. So confident with that level at this point. All right. Thanks. That's it, Dan. Thank you. As a reminder, that's star one to be placed into question queue. Our next question is coming from Stephen Volker from Jeffrey Joint Line. He's now live. Hello? Stephen perhaps your phone is on mute. Our next question is coming from Tommy Moll from Stephens. He's now live. Good morning, and thank you for taking my questions. Morning. Dan, I believe it was in your prepared remarks you mentioned some enhancements for the fastenal.com channels that are coming, and that in part, those are an attempt to improve capture of the spot buy purchases. Maybe just give us a little more insight there. And if there's any way to quantify how big an opportunity you think that is to capture more of those spot buy needs from existing customers, that'd be helpful too. Thank you. Yeah. In my answer to this question, this is Dan's opinion. And my opinion and $3 will buy you a cup of coffee. But here's what I believe based on conversations with a lot of customers over the years. With a lot of Fastenal employees over the years. When we talk internally about the e-commerce piece, we look at the customer site categories. In a lot of it, and one thing you'll notice is, and this has been true if you looked at our data that we shared in March, for a decade, as we were consolidating locations, excuse me, and rationalizing our network. That smallest customer, you saw a dramatic falloff in that customer. That customer was disproportionately tied to non-res construction. You saw a lot of falloff in that customer group. At the same time, the things that we had been investing in for years, our national accounts team, and as time progressed, our government sales team, our regional sales team, our, initially vending, but FMI initiatives, what we were really doing is creating great resources to grow our large account business. It was a really successful strategy. Within strategy, you have priorities. Priorities mean trade-offs. You look at what you can invest in today and what you invest in over time. One of the things that had to be invested in over time was the e-commerce side. Frankly, we were bad at it. Today, we're not great at it. 30% of our revenue was e-commerce in the second quarter. It does not mean we're not successful at it. I just would say we get those numbers because we're really, really good with key accounts. In every key account I visit, if I walk through the receiving area, I will see boxes that do not say Fastenal on them. That tells me there are elements of their supply chain needs, spot buys, that we're not providing. Now, it might be products that we do not sell. It might be products we sell every day, but the buyer in the engineering department does not know us the way the buyer in the production area knows us. We are all creatures of habit. They go and hop online and they buy it. Some of that became even more pronounced during COVID because when they looked at sending people home, it was not the person on the production line that was going home. It was the person that was in more of an office-setting role to get them out of the building to make it safer for everybody else. When I look at our existing customers, I believe with our 10,000-plus customers, for every dollar they spend with us, there is $0.20 they do not. I could be full of it on that answer, but I know it is not 0%. I believe there's a huge win there for Fastenal in the years to come. In the categories of customers that have been dropping off, the under $5,000, the under $1,000, the under $500, the $100 customer. What would be great if we had an e-commerce solution where that customer could hop on and easily order from us. We'd pick up business there. I believe when we go into 2026, when we go into 2027, that the drop-off we've seen in the less-than-$5,000 customer, which is really coming from the under $500 and under $100 customer groups, stabilizes. I believe it has the potential to grow, not because we're throwing labor at it, but because we have this great supply chain going across North America and more people can tap into it because it's now available in the way they want to buy. Some of that is, we have rolled out enhancements to our checkout process, to our search functionality, incorporating some AI aspects in our search functionality to make it work better. Also, having a really crisp strategy on what it is we offer in our e-commerce window that might be a subset of what we offer to a customer where we are on-site, where you can take more Herculean steps for a customer that spends $50,000 a month with you than a customer that buys from you twice a year because you understand their needs better and you can communicate expectations better. Long answer there. I hope that actually answered your question. I believe the potential is meaningful with our existing 5 and 10K-plus customers. I believe it can expand our under 5K customers. Thank you, Dan. I appreciate the insight. Jeff, I had a follow-up question for you. Your vision on running the sales organization is increasingly clear and backed up by some quantitative evidence. I mean, the contract count is a beautiful chart of blue bars up and to the right. My question is, now that you've inflicted a pretty good amount of pain on others in the marketplace, how are you seeing others try to defend their share? Or when do you expect to see that? I mean, this Fastenal market share story has been gathering momentum. Maybe this is round one. I would expect that at some point you'll see a round two, and there will be a collective response. What are you seeing there? Yeah. I mean, I look at it a couple of different ways. The first way I look at it is, and this may sound a little odd, but especially when times are tough, we have to go through tariffs or the 2009 timeframe. We obviously do a lot better then because customers need some security. They look at Fastenal right now today as, "Hey, they have a very good supply chain. They have great solutions for us." I mean, part of the reason our pipeline is so strong right now, I believe, is because of the uncertainty with the tariffs, and customers are looking for some safety and security. I do not see. One thing about us is we have such a large footprint globally that it is hard sometimes to compete with us on a global scale. If you have a site in Chicago, you have a site in Italy, you have a site in Shanghai, we're going to be able to offer you the exact same services in Chicago or Shanghai or any of our sites. That's tough to compete with these days, especially when we're talking about a supply chain on a global scale. Right now, we're seeing nothing but positives on our pipeline when it comes to that. I don't know if you want to add anything to that, Dan. No. Thank you, Jeff. I'll turn it back. Thank you. Next question is coming from Chris Dankert from Loop Capital Markets. Your line is now live. Hey, good morning. I guess I would just echo the congratulations on a really nice quarter here. Maybe this one is also for Jeff to start off. I mean, quick update perhaps on the. Success of the Customer Solution Consultant program. That team is still near 170. How are they doing versus your plan? Maybe just a quick update there would be great. Yeah. I mean, we're still looking at increasing those numbers. The reason is that team has been extremely successful for the districts, for the regions as a whole. They're really out there trying to build the contract success, and maybe not the large global sites, but the more regional sites. If you look through a lot of our customer site analysis, a lot of the success we're seeing in the 10K-plus categories comes from the CSC program. We're still looking to expand that. Obviously, it's not just in the United States. It's in every country we're in now. I think we're getting close to our number. The nice thing is I have a lot of districts now looking to add multiple CSCs to their area. Once they can afford it, they want more and more. There is a reason for it. It has been a very successful program for us so far. Got it. I guess maybe just as a follow-up. Are there additional opportunities around role specialization? I know we spent a lot of time diving deep there at the analyst day. I mean, is it really more about maintenance weeks at this point, or are there still some fairly large-scale shifts in blue team roles that are available here? I do not think there is a lot of large shifts still to do. I think maybe some maintenance, like you said, certain areas of the country, certain areas of the globe still have some work to do on. Getting that clear or more clear in certain areas. For the most part, I don't think I see any major shifts coming with role clarification. You? I would say there's always things you discover because in a deeply specialized organization, you have a great aligned plan. You still have great district and regional leaders. You have great contract customer leaders, our national accounts team as an example, our government sales team as an example, that try nuances to it because of discussions with customers. All of a sudden, you see some success occurring in one of our regional business units or with a group of customers. You start asking questions. Some of that will lead to refining as we go forward. Right now, I can't think of anything offhand that jumps out. Been really successful. Thank you. Next question today is coming from Chris Snyder from Morgan Stanley. Your line is now live. Thank you. I wanted to ask about price. On the last conference call, you guys talked to three to four points of price here in Q2. It came in closer to 1.5%. Is that just a definition in that when you guys were saying three to four, that was the exit number, not the quarterly average? And then I guess, what should we expect on price cadence here into the back half of the year? Thank you. I'm going to answer the first half of that, and I'll give, between Kevin Fitzgerald, who's in the room, or Sheryl was in the room, the opportunity to chime in on the second part. When we had our call in April, the only thing that was certain at that point in time. Was this as chaotic as hell. You were not really sure what was going to happen. From day to day, you have a tariff. You hear about something going to a crazy level tariff. When you start talking about a 150% tariff on something, you just kind of look at yourself and do not know even how to respond to it. There was the pause that kicked in. There were different starts and stops, starts and stops. When we answer a question, we look at it based on what we know today. Here is what we think. As I mentioned earlier, our goal is not to be the greatest pricing company in the world. Our goal is to be the best supply chain organization in the world and to give great visibility to our customers so they have the ability to make decisions when their supply chain becomes more expensive or more chaotic. We frankly did not know, but here is what we thought. As it played out, some of those pauses kicked in. It changed the timing of things we are doing. As it turned out, it was more of that is how we exited the quarter, not how we thought we would be there by May 1, not exit the quarter at that level. Even when we look out to the second half of the year, we have thoughts on steps we are taking, things that we have communicated. Some of those are still up in the air based on what happens. You see it in the news every day. A headline says, "We're doing this with this trading partner or that with another trading partner." It changes. What we really try to do is understand what are we seeing in our costs. How do you communicate that to the customer? Our goal here is to defend our margin, not to enhance it. Our margin improved in the quarter because of the FASTR initiative. That's what really drove it. That had nothing to do with tariffs. It turned out we exited the quarter that way. Kevin, I don't know if you want to chime in or Sheryl? Yeah. No. To Dan's point, we did. We exited the quarter closer to that three range as we guided on the Q1 call for Q2. We'll continue to see that ramp up, though. As we sit here in Q3, we'll continue to probably see in that 3-5 range. And then kind of to Dan's point. There's a lot of things changing all the time. I do think we can get into that 5-8 range by the end of the year. But some of it's just going to be dependent on what happens on August 1st, what happens with Section 232 tariffs. So a lot still unknown, but we're still moving forward with what we do know. And those ranges seem to be accurate. I'll close with a thought on that. And that is. I believe our team is really good at communicating with our customer. Our customer trusts the information we provide because we're very transparent. And one feedback I've received from customers when I travel and I travel quite a bit. A month ago, I was down in Illinois. We had a 40-year employee that Bill Drazkowski and I went down to celebrate with that individual. We visited some customers. There were a few customers that I visited where their head of operations not only greeted us but sat in on a discussion. He caught me afterwards and was very complimentary of our team from the standpoint of not only what they communicated on our supply chain into their business, but the insight we're able to give them on their other supply chains, whether it's direct or through other companies that come into their business, because we worked to really simplify the information. Long story short, I think that means we can be effective at communicating, and that translates into results because we're not raising prices. Our prices reflect the cost of the supply chain coming into our customer. Thank you, Dan. I really appreciate all that color and transparency. If I could just follow up with a quick one. I think three months ago, you kind of said the conversation with customers was really about, "Don't shut us down," less about maybe price. Is that still the nature of the conversations today? Thank you. I think today it's more about price. I think there's some fatigue going on. That fatigue is not just with customers. That fatigue's with our folks. That fatigue is with our suppliers, our folks that work with customs. I think it's more price than it is shut down the line today. Thank you. I appreciate that. I see we're at about four minutes to the hour. If we could have a question that we could answer in a minute or two, I'd appreciate it. Sure. Our next question is coming from Patrick Baumann from JP Morgan. Your line is now live. Yeah. This will be a quick one. The gross margin expectation for the year, how does price cost look in that relative to the way you're thinking about it? And are there any unusual drivers besides that we should think about as we think about modeling the gross margin beyond this year? Thank you. I think the price cost becomes challenging in the second half of the year. We're a little bit ahead of it. Our goal would be to stay with it. I don't know if that means we're 10 or 15 basis points ahead of it or 5 or 10 basis points behind of it. I guess time will tell. But. That gets more challenging as we get deeper into it and we have more and more of that higher cost inventory coming through. Very good. Turn it back over for any further closing comments, or would you like to take another question, sir? No. I think we're good. We'd like to finish on the hour. I would just throw out, we've made several leadership changes during the quarter. Essentially, the last two years have been about investing in depth. We moved Jeff into the role he's in over the last couple of years. We backfilled on the international side with some deep-bench talent that we have. We're blessed in that we're promoted from within the organization, and we have deep talent in the organization. It doesn't make decisions easier, but it makes the probability of decisions stronger for success. And during. The quarter, Casey Miller and Bill Drazkowski, who had taken a lot on their shoulders over the last two years after Jeff asked them to. We modified their structure within their team, elevated two individuals within Casey Miller's group to split the U.S. into two business units again. I am pleased to say that the two individuals that stepped in, Kevin Davis and Bob Hopper, have 26 years of experience on average. Kevin's at 24 and Bob's at 28. Bill Drazkowski elevated two individuals on the team, and essentially, the elevation was really about their team and giving them the opportunity to step into more roles and to give Bill and Casey some breathing room because they were really stretched thin. That is Scott Bailey and Bill Reichenbacher, and those guys are both 30-plus years. Incredible talent that is getting elevated. I'm excited what that means for those business units and the teams under them too. Spread their wings a bit. With that, thank you. Everybody have a good balance of the day. Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.