10-QPeriod: Q3 FY2021

FASTENAL CO Quarterly Report for Q3 Ended Sep 30, 2021

Filed October 15, 2021For Securities:FAST

Summary

Fastenal Company (FAST) reported solid third-quarter 2021 results, demonstrating a strong recovery from the pandemic's initial impacts. Net sales increased by 10.0% year-over-year to $1.55 billion, driven by robust demand in manufacturing and construction sectors. Gross profit margin improved to 46.3% from 45.3% in the prior year's quarter, reflecting favorable product mix and overhead leverage. Net earnings saw a significant 9.9% increase to $243.5 million, resulting in diluted earnings per share of $0.42, up from $0.38 in Q3 2020. The company highlights a normalization of business trends, with sales now more reflective of traditional economic dynamics rather than pandemic-specific demands like PPE. While supply chain disruptions and labor shortages persist, Fastenal's core business appears resilient. Growth in the fastener product line, a key indicator of underlying industrial activity, was particularly strong at 20.2% daily sales growth in the quarter. The company also reported significant growth in its digital offerings, with FMI net sales up 45.0% and e-commerce daily sales up 43.4% in the quarter.

Financial Highlights

51 data points
Beta

Revenue

$1.55B

46.3% Gross Margin

Net Income

$243.50M

15.7% Net Margin

EPS (Diluted)

$0.21

Total Assets

$4.22B

Cash & Equivalents

$250.50M

Free Cash Flow

$120.00M

Financial Statements
Beta
Revenue$1.55B
Cost of Revenue$834.00M
Gross Profit$720.20M
SG&A Expenses$401.80M
Operating Income$318.40M
Interest Expense$2.40M
Net Income$243.50M
EPS (Basic)$0.21
EPS (Diluted)$0.21
Shares Outstanding (Basic)1.15B
Shares Outstanding (Diluted)1.15B

Key Highlights

  • 1Net sales increased 10.0% year-over-year to $1.55 billion in Q3 2021, driven by a rebound in manufacturing and construction.
  • 2Gross profit margin improved to 46.3% from 45.3% in Q3 2020, attributed to better overhead leverage and product mix.
  • 3Net earnings rose 9.9% to $243.5 million, with diluted EPS growing from $0.38 to $0.42.
  • 4The company notes a normalization of sales, with a return to pre-pandemic business dynamics, though supply chain issues and labor shortages are still present.
  • 5Fastener product line daily sales showed strong growth of 20.2% in Q3 2021, indicating underlying market strength.
  • 6Digital sales channels are expanding rapidly: FMI net sales increased by 45.0% and e-commerce daily sales grew by 43.4% in the quarter.
  • 7The company declared a quarterly dividend of $0.28 per share, signaling confidence in its financial position and commitment to returning value to shareholders.

Frequently Asked Questions

Revenue growth in the third quarter of 2021 was primarily driven by improved business activity in the manufacturing and construction sectors, leading to higher unit sales. The fastener product line, considered a key indicator of underlying market strength, saw significant daily sales growth of 20.2%. Additionally, digital channels like Fastenal Managed Inventory (FMI) and e-commerce experienced substantial growth.

The company reports that its Q3 2021 results are more reflective of traditional economic conditions compared to the prior year, which was heavily influenced by pandemic-specific factors like PPE demand. While pandemic-related operational impacts have narrowed, supply chain disruptions and labor shortages persist and are influencing customer access and sales cycles. The prior year's surge in PPE sales has normalized, impacting year-over-year comparisons for safety and government customer segments.

While the company saw strong growth in FMI net sales (up 45.0%) and e-commerce daily sales (up 43.4%) in Q3 2021, the company notes that signings for both Onsite locations and FMI devices are trending below prior expectations. Management attributes this to current market challenges such as inflation, supply chain issues, labor availability, and increased COVID-19 infections, which are lengthening sales cycles. Despite this, FMI device installations saw a 10.0% year-over-year increase, and daily sales through FMI devices grew 45.0%.

Fastenal experienced increased costs for products, particularly fasteners, and transportation services. To counter this, the company has implemented product price increases and other pricing actions. These actions, combined with benefits from product and customer mix and favorable supplier rebates, helped offset inflation and supported an improvement in gross profit margins during the quarter.