10-QPeriod: Q2 FY2021

FASTENAL CO Quarterly Report for Q2 Ended Jun 30, 2021

Filed July 16, 2021For Securities:FAST

Summary

Fastenal Company's (FAST) second quarter 2021 filing indicates a resilient performance as the company navigates the post-pandemic economic landscape. While overall net sales saw a slight decrease of 0.1% compared to the second quarter of 2020, this was largely due to a significant drop in 'surge' sales of Personal Protective Equipment (PPE) and sanitation products that boosted the prior year's results. Excluding these pandemic-specific items, the company demonstrated robust underlying growth, particularly in its core manufacturing and construction markets. Profitability metrics showed improvement, with gross profit increasing by 4.3% and operating income by 0.5% year-over-year for the quarter, leading to a slight increase in net earnings. This was driven by a favorable shift in product mix towards higher-margin fasteners and improved organizational leverage. The company continues to invest in its digital capabilities and Onsite locations, which are showing strong growth, and maintains a positive outlook compared to pre-pandemic 2019 levels. Despite ongoing supply chain challenges and inflationary pressures, Fastenal's strategy appears to be effectively positioning it for sustained recovery and growth.

Financial Highlights

51 data points
Beta

Revenue

$1.51B

46.5% Gross Margin

Net Income

$239.70M

15.9% Net Margin

EPS (Diluted)

$0.21

Total Assets

$4.17B

Cash & Equivalents

$321.80M

Free Cash Flow

$136.90M

Financial Statements
Beta
Revenue$1.51B
Cost of Revenue$807.00M
Gross Profit$700.70M
SG&A Expenses$382.90M
Operating Income$317.80M
Interest Expense$2.60M
Net Income$239.70M
EPS (Basic)$0.21
EPS (Diluted)$0.21
Shares Outstanding (Basic)1.15B
Shares Outstanding (Diluted)1.15B

Key Highlights

  • 1Net sales for Q2 2021 decreased by 0.1% year-over-year to $1,507.7 million, primarily due to the absence of 'surge' PPE and sanitation product sales that significantly boosted Q2 2020 results.
  • 2Gross profit increased by 4.3% to $700.7 million, and gross profit margin improved to 46.5% from 44.5% in Q2 2020, driven by a favorable product mix (higher-margin fasteners) and organizational leverage.
  • 3Operating income saw a modest increase of 0.5% to $317.8 million, with operating margin improving to 21.1% from 20.9%.
  • 4Net earnings increased slightly by 0.4% to $239.7 million, resulting in diluted EPS remaining flat at $0.42.
  • 5Daily sales of fasteners, a key indicator of underlying market strength, increased by 28.4% in Q2 2021 compared to Q2 2020.
  • 6The company's digital footprint (FMI and e-commerce sales) represented 41.7% of total sales in Q2 2021, up from 39.1% in Q1 2021.
  • 7Fastenal continues to expand its Onsite locations, with active sites increasing by 9.2% year-over-year to 1,323, and Onsite daily sales growing over 25% in Q2 2021.

Frequently Asked Questions

Fastenal's net sales decreased by 0.1% to $1,507.7 million in Q2 2021 compared to Q2 2020. This slight decline was primarily due to the absence of significant 'surge' sales of PPE and sanitation products, which had artificially boosted Q2 2020 revenue due to the COVID-19 pandemic. However, underlying demand from traditional manufacturing and construction customers was notably stronger in Q2 2021, offsetting the decline in pandemic-related product sales.

Fastenal demonstrated improved profitability in Q2 2021. Gross profit increased by 4.3% and the gross profit margin expanded to 46.5% from 44.5% in the prior year. This improvement is attributed to a favorable shift in product mix towards higher-margin fasteners, better organizational leverage as sales grew, and favorable net rebates. These factors helped offset increased freight expenses and a write-down of inventory earlier in the year.

Fastenal acknowledges ongoing supply chain disruptions and inflationary pressures, particularly in product and transportation costs. The company has implemented pricing actions to mitigate these impacts and expects further actions in the second half of 2021. While supply chain disruptions have limited inventory build-up, the company is also focused on improving inventory flow and optimizing its network, including closing underperforming branches.

Fastenal's 'Digital Footprint,' which includes Fastenal Managed Inventory (FMI) solutions like vending and bin systems, as well as e-commerce sales, represented 41.7% of total sales in Q2 2021. This indicates a strong and growing channel for the company. Furthermore, the expansion of Onsite locations (9.2% increase year-over-year) and the strong growth in Onsite daily sales (over 25% in Q2 2021) highlight the company's success in deepening customer relationships and providing specialized, on-site services.