10-QPeriod: Q3 FY2022

FASTENAL CO Quarterly Report for Q3 Ended Sep 30, 2022

Filed October 18, 2022For Securities:FAST

Summary

Fastenal Company (FAST) reported strong financial performance for the nine months and third quarter ended September 30, 2022. Net sales showed significant year-over-year growth, driven by a combination of higher unit sales, pricing actions to mitigate inflation, and strong demand in manufacturing-related markets. The company also demonstrated robust operating income and net earnings growth. Key financial highlights include an increase in gross profit and a decrease in operating and administrative expenses as a percentage of net sales, leading to improved operating and net earnings margins. Cash flow from operations remained strong, supporting investments in the business and returns to shareholders through dividends and share repurchases. The company continues to invest in its digital footprint and expand its Onsite and FMI technologies to enhance customer relationships and operational efficiencies.

Financial Highlights

51 data points
Beta

Revenue

$1.80B

45.9% Gross Margin

Net Income

$284.60M

15.8% Net Margin

EPS (Diluted)

$0.25

Total Assets

$4.63B

Cash & Equivalents

$231.50M

Free Cash Flow

$209.90M

Financial Statements
Beta
Revenue$1.80B
Cost of Revenue$975.90M
Gross Profit$826.50M
SG&A Expenses$447.30M
Operating Income$379.20M
Interest Expense$4.10M
Net Income$284.60M
EPS (Basic)$0.25
EPS (Diluted)$0.25
Shares Outstanding (Basic)1.15B
Shares Outstanding (Diluted)1.15B

Key Highlights

  • 1Net sales increased by 18.0% for the nine months ended September 30, 2022, and by 16.0% for the third quarter, driven by strong demand and pricing strategies.
  • 2Operating income grew by 22.3% for the nine months and 19.1% for the third quarter compared to the prior year, indicating effective cost management.
  • 3Diluted Earnings Per Share (EPS) rose to $1.46 for the nine months and $0.50 for the third quarter, up from $1.20 and $0.42 respectively, demonstrating improved profitability.
  • 4Gross profit margin improved slightly to 46.3% for the nine months, while the third quarter saw a minor decrease to 45.9% due to product/customer mix and cost pressures.
  • 5Operating and administrative expenses as a percentage of net sales decreased in both the nine-month (25.1% vs. 25.6%) and three-month (24.8% vs. 25.9%) periods, improving operational leverage.
  • 6Cash flow from operating activities saw a significant increase, particularly in the third quarter, indicating strong cash generation to fund operations and investments.
  • 7The company continues to invest in its digital offerings, with 'Digital Footprint' sales representing 48.2% of total sales for the nine months, up from 41.5% in the prior year.

Frequently Asked Questions

Fastenal's net sales growth was driven by a combination of factors including higher unit sales, particularly in manufacturing-related markets, and pricing actions taken to offset marketplace inflation for products and transportation services. Demand in industrial capital goods and commodities was strong, largely outweighing softer conditions in consumer goods and construction.

The company effectively managed its operating and administrative expenses, which decreased as a percentage of net sales in both the nine-month and third-quarter periods. This improvement was largely due to favorable trends in occupancy-related and employee-related expenses as a percentage of sales, demonstrating good operational leverage.

Accounts receivable increased due to higher sales activity and a shift in customer mix towards national accounts with longer payment terms. Inventory also grew, primarily to support increased business activity and to build resilience against supply chain disruptions by deepening inventory levels. Inflation contributed to a lesser extent to inventory growth in the third quarter compared to earlier in the year.

Fastenal is focusing on expanding its digital capabilities, including its FMI (FASTStock, FASTBin, FASTVend) technologies and eCommerce business. It is also growing its network of Onsite locations, which provide dedicated sales and service directly at customer facilities. These initiatives aim to enhance customer relationships, improve product availability, and create operational efficiencies.