Hello, and welcome to the Fastenal 2024 Q1 Earnings Results Conference Call. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Taylor Ranta of the Fastenal Company. Please go ahead, Taylor.

Welcome to the Fastenal Company 2024 first 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 June 1, 2024, 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.

Thank you, Taylor, and good morning, everyone. I appreciate you joining us for our first quarter call. I'll get right to page 3 of the flip book, where my comments can be summarized in five points. First, it was a tough quarter. Second, we faced a tricky calendar. Third, we highlighted the customer expo. Fourth, we had strong performance on our growth drivers. Finally, we are in a financially strong position, and that strength is continuing to build as we've seen in recent years. Regarding the tough quarter, we achieved about 2% growth. Initially, we expected a figure closer to 4%. The tricky calendar arose from January and February being seasonally weaker months for us, with March typically improving as we transition into spring. Having two days shifted out of March and into January and February didn’t help, but we were aware of that going into the quarter. Additionally, ending the quarter on Good Friday in March rather than April was a bit of a setback. However, the core issue remains sluggish demand. On a positive note, after 16 consecutive months of a sub-50 Purchasing Managers Index, we surpassed 50 in March. I discussed this with Holden, and he mentioned they’ve been checking PMI statistics since the early 1970s. In reviewing the data, we found only two occasions with longer 16-month durations, one being in the early 1980s lasting 19 months and the other during the dot-com crisis in the early 2000s for about 17 or 18 months. Their declines were more severe, dropping further into the 40s and even upper 30s. Other challenging periods like 2008-2009 were shorter but steeper. We feel optimistic about March, and time will reveal if this improvement is lasting or merely a temporary upswing, but it indicates potential positive trends as we approach the latter half of the year. I'm excited about the upcoming customer expo we'll host on the 17th and 18th in Nashville, Tennessee. A significant challenge for us in recent years has been customer acquisition, particularly since about 20 years ago when we introduced an employee event that enabled interactions with suppliers for planning discussions and trade shows. Initially, it was an employees-only event, but a few years later, we allowed employees to invite their customers, enhancing exposure to our supply chain. Unfortunately, in 2020 and 2021, we had to pause this event due to COVID-19, which affected our engagement with customers over time, as reflected in on-site signings. I'm pleased to announce that after restarting the event in 2022 and continuing in 2023 and 2024, we are surprised by the overwhelming interest, necessitating a significant expansion. We expect 50% more attendees this year compared to last year, with double the number of attendees than we had previously. This is a positive indicator of our ability to capture market share within that customer segment. While it presents an expense challenge for the second quarter, it's a positive one. Now, turning to page 4 for growth drivers, we had 102 on-site signings this quarter. The number of active sites operating at the end of the quarter increased by about 12% compared to the same quarter last year. Sales through this channel grew in low single digits, indicating that the demand issue is being reflected in our numbers, as this figure should align more closely with overall unit growth. For FMI Technology, we signed 105 devices per day, an achievement only reached in one previous quarter. A few years ago, we set a goal for our infrastructure to support 100 signings a day, and by 2022, we achieved about 83 per day, increasing to around 90 in 2023, based on the first three quarters' averages. We've consistently aimed to get that number over 100 and have internally challenged our team to increase it into the 120s. We are confident in our progress with Onsite and FMI Technology in capturing market share. In comparison to unit growth, FMI now has 10.5% more devices than a year ago, although we have observed a slight revenue drop per device; for instance, safety saw about 8% growth while revenue per device has decreased by 1% to 2% year-over-year. This reflects overall demand and our strategy to increase market share through the deployment of more devices. We will adapt to actual consumption levels among customers, whether demand is strong or weak, as it represents a commitment to permanent market share. I'm pleased with the advancements we’re making, particularly in safety, where about half of our vending sales are safety products. E-commerce is gaining significant traction, and our digital sales continue to grow, nearing 60%. We anticipate hitting about 66% this year, with an ultimate goal of reaching 85% of our sales. To wrap up, I feel optimistic about our progress, but as I mentioned earlier, it was a tough quarter, and we are hopeful about our future growth. Now, I’ll turn it over to Holden.

Great. Thanks, Dan. Good morning, everyone. I'm going to begin on Slide 5. Total and daily sales in the first quarter of 2024 were up 1.9%. Q1 is seasonally low volume to start, but this year contended as well with severe weather in January and a Good Friday holiday that fell in March for the first time in five years, an impact that was compounded by it following on the last business day of the quarter. This timing is estimated to have cost us 30 to 50 basis points of growth in the quarter. No matter how one treats this noise, however, it doesn't mask that the primary challenge remains poor underlying demand. Industrial production declined slightly in January and February, but the components that most directly affect Fastenal such as machinery, were much weaker than the overall index. Overall, end market and product dynamics are unchanged from prior periods. Total manufacturing grew 2.6%, continuing to moderate from prior periods, while our fastener product line was down 4.4% with contraction in MRO and OEM products. This reflected soft industrial production, particularly for key components such as fabricated metal and machinery, and in the case of fasteners, negative pricing. Non-residential construction and reseller continued to contract though at moderating rates as we experienced easier comparisons. Sales into warehousing, which are the fulfillment centers of retail-oriented customers, remained healthy in the first quarter of 2024, albeit not quite at levels experienced in November and December of 2023. This combined with good FMI signing contributed to 8.3% growth in sales of safety products. The tone of business activity from regional leadership is best characterized as steady at weak levels. We are encouraged by the forward-looking PMI moving above 50 in March for the first time since October '22. However, current conditions remain better defined by the string of sub-50 readings that prevailed in the latter part of '23 and at the start of 2024. Now to Slide 6. Operating margin in the first quarter of 2024 was 20.6%, down 60 basis points year-over-year. Looking at the pieces, gross margin in the first quarter of 2024 was 45.5%, down 20 basis points from the year-ago period. Product and customer mix was a drag, partly offset by slightly positive price/cost, which continues to recapture the negative price/cost that we experienced in the first quarter of 2023. In addition, with stocking levels largely rightsized, we experienced an increase in product movement across our network, which produced leverage of internal and external trucking resources. SG&A was 24.9% of sales in the first quarter of 2024, an increase from 24.6% from the year-ago period. Total SG&A was up 3.2%. Occupancy and other SG&A expenses were well contained, increasing just 1.5% collectively. The deleverage was from labor costs, which increased 3.9%, which included a 3.3% increase in average FTE in the period and substantially higher health care costs. The consistent low growth in SG&A over the last five quarters reflects the Blue Team doing a good job, spending where appropriate to support growth and scrimping where appropriate to preserve margin, but at some point, sales growth is the core issue. As growth accelerates, we believe we will leverage the P&L. That said, I wanted to provide a little color on some factors that may affect margins in the second quarter of 2024. First, we continue to make investments in travel, hardware, and personnel to support near and intermediate-term growth. This won't necessarily be any greater than was true in the first quarter of 2024, but it was a reason for deleverage in the period and could be again if growth doesn't accelerate in the second quarter. Second, the expansion of attendees at our customer expo will result in an increase in expenses in the second quarter of 2024, on both an annual and sequential basis. Third, our success solving certain customers' supply chain challenges in the fourth quarter of 2023 has created opportunities to service these customers at greater scale in the future. This will require certain near-term investments to ensure that we can meet these customers' needs. The latter two items could impact second quarter 2024 operating margins by approximately 30 basis points. We do not expect these costs to carry over into subsequent periods. Putting everything together, we reported first quarter 2024 EPS of $0.52, flat versus the first quarter of 2023, with net income up just slightly at up 0.6%. Turning to Slide 7. We generated $336 million in operating cash in the first quarter of 2024, or 113% of net income. While below the prior year, when we deliberately reduced layers of inventory, the current year's conversion rate is consistent with historical first quarter rates. With good cash generation and a soft demand environment, we continue to carry a conservatively capitalized balance sheet with debt being 5.5% of total capital, down from 10.9% of total capital at the end of the first quarter of 2023. Working capital dynamics were consistent with recent periods. Accounts receivable were up 5.5%, driven primarily by total sales growth and a shift towards larger customers, which tend to have longer terms. Inventories were down 9.4%, which continues to reflect primarily the reduction of inventory layers built a year ago to manage supply constraints and modest inventory deflation. While we will continue to focus on continuous improvement as it relates to inventory management, the rate of decline in our inventory balances will likely moderate going forward as the process of rightsizing our stock is largely complete. Net capital spending in the first quarter of 2024 was $48.3 million, an increase from $30.9 million in the first quarter of 2023. This increase is consistent with our expectations for the full year where we anticipate capital spending in a range of $225 million to $245 million, up from $161 million in 2023. This increase remains a result of spending for hub automation and capacity, the substantial completion of an upgraded distribution center in Utah, an increase in FMI spend in anticipation of higher signings, and in information technology. Now before turning to Q&A, I wanted to offer a higher level perspective on the quarter. Quantitatively, as Dan noted, it was challenging. But qualitatively, it was an encouraging quarter. We've touched on our disappointment with the pace of customer acquisition over the past several quarters and the changes made in mid-2023 to begin addressing this. We view customer enthusiasm for our expo, the solid performance of our growth drivers, and trends in our contract business as manifestations of those efforts starting to take root. Change takes time, and success can be uneven. However, we do believe we are seeing good indications of progress, which should reaccelerate market share gains as we proceed through 2024. With that, operator, we will turn it over to begin the Q&A.

Thank you. We’ll now be conducting a question-and-answer session. Our first question is coming from Tommy Moll from Stephens.

Good morning, and thank you for taking my questions.

Good morning.

I wanted to double-click on Onsites where the KPI this quarter was quite strong, as you referenced. And Holden, you alluded to some of the leadership changes from recent months. I assume there's a connection there. But what can you do to just bring us in a little deeper on that Onsite performance in Q1 and what you might expect going forward? What's changed?

One of the changes we made, going back about 15 years, was to divide our business into three separate entities: the Eastern US, the Western US, and international. Our national accounts team was also split into three sections to align with these business units, and we maintained that structure for around seven years. However, by 2014, it became apparent that having three distinct entities for national accounts was somewhat chaotic. As a result, we consolidated everything under one umbrella. In 2022, we were seeing solid performance and a recovering economy. However, when I analyzed our Onsite signings and contract acquisition numbers, I noticed they were starting to decline. It wasn't about a specific person or issue; it was more about whether we were focused on a shared objective or too preoccupied with our individual goals. While many groups were highlighting their successes, it became clear that if each group is thriving but the organization is not, there’s a disconnect in our perspective. In the spring of 2023, we restructured everything under a single sales leader and combined the US operations back into one business unit. Change brings disruption, and it can take time to build momentum. A reflection of this is seen in our Onsite signings; while one month doesn’t constitute a trend, there has been an improvement. Recently, we've been busy coordinating our trade show, which has resulted in securing additional hotel rooms and event space beyond what we had initially planned. This activity indicates an engaged sales team and customers who are keen to understand how we can support their businesses. What stands out to me is the significant sign-up rates, especially when compared to the post-COVID landscape, with many attendees at our show eager to learn about our services. From my own experiences during visits, I’ve noticed some positive momentum in the market, which is encouraging. However, we need to manifest our efforts into contract signings at a more acceptable rate, as there has been a lag. The process of shifting our sales focus, achieving traction, and converting that into revenue doesn't happen overnight.

Probably what I might add to that is I think an area where some of the changes are, perhaps, having the most rapid beneficial impact is probably on the contract side of the business. We've seen improvements in sort of the rate of signings on the contract side as well. And bear in mind, when you're talking about national accounts and large customers, those also tend to be the kinds of customers that are signing up Onsite, utilizing more vending machines, right? Some of the early indications of success we're having in that group, I think, also lend itself to that area. So again, it's uneven. I know Onsite signings can be lumpy, but you just look at a lot of those indications as a sign that the steps we've taken are beginning to take root.

Thank you, both. As a follow-up, I wanted to ask about a new disclosure you introduced today, just breaking out your OEM versus MRO fastener business with some new granularity there. I was just curious what was the decision-making process to do that? And is there a takeaway you want us to make sure to have today? I mean one that comes to mind is just the relative size of those two businesses where OEM is nearly 2x the MRO in terms of revenue contribution. But if there's something you want to make sure we take away, please flag it for us.

We've been looking at that number internally for a number of years. In full disclosure, when we first started delineating it, we had to figure out how to do it because it isn't always evident what is an OEM sale and what's an MRO sale. In the early years, the way we did it, OEM sales are not taxable, MRO sales are taxable. Our initial take at estimating what the two pieces were was to look at it in that lens. And that actually proved to be pretty accurate. We fine-tuned it and fine-tuned it. I think the biggest reason why Holden is willing to put it in a document is because he feels more comfortable talking about it in print rather than talking about it in concept. Other than that, I don't know if there's a message behind it and Holden you might tell me I'm full of it, and he's got a message there.

As I often mention, we're not complicating things with data analysis. We collect the data and aim to offer some insights. Both OEM and MRO generally follow the same trends as industrial production. However, there is some valuable information to consider. When focusing on Onsite, it seems that Onsite's are likely more aligned with OEM fasteners than with MRO fasteners. Therefore, Onsite's performance provides additional detail and context regarding cyclicality. While the overall trend may be the same for OEM fasteners, the intensity of changes can differ, giving us more understanding of the situation.

Appreciate it. I'll turn it back. Thank you.

Thank you. Your next question is coming from Chris Snyder from UBS. Your line is now live.

Thank you. And I appreciate the question. Maybe first, starting on SG&A and the willingness to spend and invest in the business. I felt like the past couple of quarters the message was really tightening the belt in response to lower growth. This quarter, it seems like it's more willing to spend to support and drive that higher growth. So is that the right takeaway? And do you feel like maybe more spending is needed to get back to the more normalized historical levels of market outgrowth and customer acquisition? Thank you.

Yes. I would put it slightly differently. We've been investing to grow consistently, but we faced some offsets, which we discussed in the January call. We closed locations for a decade, which provided us with a slight offset. Throughout 2023, one offset was that in 2022, our earnings saw significant growth. Since our incentive compensation is tied to earnings growth, that portion increased substantially. However, it softened over 2023 and became more normalized. As we move further away from 2022, some of that benefit is no longer present. This situation isn't strictly about growth and expenses in absolute terms. Rather, it's more about how our growth investments are becoming more evident now compared to the last six to eight quarters.

Yes. I think really, I think what's changed is the rate of growth, too. I often get asked, where is that delineation point where you can expand margin or contract margin. And I've always said it's kind of around that mid-single-digit number. I think we've done a nice job limiting the last five quarters our SG&A growth to 5% or less in each of them. At the levels of growth, which were unsatisfactory, but not first quarter 2024 unsatisfactory, we were able to defend the margin. I think part of the point I wanted to make is we're not panicking over the deleverage. We don't have a cost problem. But at the same time, there are some things that we're going to continue to invest in. When I called out 20% growth in sales travel, I don't know that I regret that, to be honest, because I think that that is related to the improvements we're having in our contract business, the improvements we're having in our signings. We're not going to react to a 2% growth quarter, which we believe is very temporary, by beginning to slash costs. I think that was the message. Our approach has always been that we're going to invest in the business, and we continue to do so.

Appreciate that. It makes a lot of sense. For the follow-up, a question that we continue to get from investors is around the impact of potential tariffs based on the outcome of the November election. So, just would be interested in your guys' perspective and what that could mean for the business? Thank you.

Our commitment to our customers is centered around ensuring a reliable, high-quality, and cost-effective supply chain. We prioritize the diversity of our suppliers. In the past, our focus was primarily on the number of suppliers rather than their geographic locations. For any given commodity or fastener, we aim to have multiple supply sources. This diversity allows us to pivot in case of disruptions. Additionally, we strive to be a significant customer for our suppliers, ensuring that we are prioritized in supply constraints due to our reliability and cash payments. These strategies are particularly effective in difficult supply environments. We are actively working to diversify not just the number of our suppliers but also the geographies from which we source our products. This is a crucial part of our commitment to our customers. We also carefully evaluate the cost-effectiveness of maintaining diverse supply options, as there is a trade-off involved. Tariffs can complicate this trade-off by altering the financial calculations and increasing supply chain costs. When customer supply chain costs rise, it can lead to faster revenue growth for us as we adjust our pricing accordingly. Ultimately, our promise to our customers is to maintain a highly reliable supply source, ensuring impeccable quality and cost-effectiveness in our supply chain, which we manage every day.

Probably the only thing I would add to that is our execution wasn't as crisp as we might have liked during the first period where there were tariffs. Remember, there were also some ancillary inflation on top of the tariff that was occurring at that time. We struggled a little bit to capture it all in the moment. I would say that since that, and frankly because of that period, we made significant investments in the technology that we utilize to understand the environment and communicate internally and externally with the structure of our business and how we kind of manage our pricing and costing processes. I think you've seen the effectiveness of those changes through these last few years where there's been very significant inflation and our ability to keep up with it fairly effectively and on time. I don't know what the future holds, but to the extent that anything moves up the cost of product, we think we're better served to execute effectively than we were five years ago during the last period of time.

Thank you. I really appreciate the perspective.

Thank you. Next question today is coming from Stephen Volkmann from Jefferies. Your line is now live.

Thank you. Holden, you mentioned in your gross margin comments that you mentioned transportation resources and a little bit of price degradation, I guess. I'm just curious, have you changed your view of the cadence of gross margin as we move into the next three quarters?

No, I haven't. I think my original comment was that you wouldn't see quite as much mix impact and there may be some offsets. As we expected to see gross margin down in 2024, it may not be down as much as it has been in historical periods. I think the first quarter was representative of that down 20 basis points. That narrative still very much holds true. Some of the investments that I alluded to, some of those fall in SG&A, some of those fall in COGS. There will be perhaps a little bit of a delta in Q2 specifically. I think we sort of addressed that, but by and large, the variables we anticipated resulting in a more subdued drag on margin in 2024. I still see them very much in place. So, no change to how I feel about gross margin cadence.

Great. Thank you for that. And then switching back to the customer expo, is that the kind of event where you actually sign up various things like actual revenue comes out of it or is it more of a customer relationship type building exercise?

It's both, but one advantage of an event like this is that it sometimes poses a challenge in getting the attention of decision makers and communicating within that group. The customer show brings in the right audience, including both Fastenal and our customers. It also creates great awareness by allowing attendees to see and touch vending machines, view RFID setups, understand our market approach, and engage with suppliers and other customers. We also conduct several seminars where we discuss various topics. Our goal is to convey the unique nature of the supply chain provided by Fastenal and why we believe it's advantageous for our customers. These interactions can lead to deals being finalized, but they also open up many opportunities for expansion. In the past, while working with our national accounts team, I had more meetings with customers than I had in the previous 15 years. I was often surprised to learn that customers doing $20 million a year with us could easily triple or quadruple their business if they chose to. We need to provide them with a compelling reason to do so because we believe we are the best supply chain partner available. Part of this involves effectively telling our story, and we do an excellent job at that. But to directly answer your question, it's a bit of both.

Make no mistake, Stephen, if we have to talk to you about what the impact of the cost is going to be in the second quarter, we do expect a return on it. It may not all happen at the show, but it's expected to happen shortly thereafter.

Great. Appreciate that. Thanks, guys.

Thank you. Your next question is coming from Jacob Levinson from Melius Research. Your line is now live.

Hi. Good morning, everyone.

Good morning.

Holden, you mentioned a couple of very broad end markets that have been challenging, I think, for a little while now, fabricated metals, and machinery. Obviously, those are pretty broad. And certainly, we've got some cycles that seem to be rolling over like ag and truck, but just trying to get a sense of where the negative outliers are today for your trucks.

Yes. If those categories are too broad for you, take that up with the federal government. I'm just going by SIC codes. Honestly, I think it kind of is reflective in the end market chart that we have in the press release. Pretty much every end market is converging on itself. We've been over a year here of sluggish demand in a market that I think has affected most markets. When I talk to the regional leadership, they provide their feedback, there's different times when certain markets are called out because they're either stronger or weaker or what have you. I'm not getting a lot of end market callouts, which suggests to me that people are feeling a general softness across the board. So, I don't have a lot of market-by-market color to add, and I'm not sure there is much.

Okay. Yes. That's great color. Maybe expanding a little bit on Steve's question on pricing, I mean, certainly, steel is more important for you folks who we've seen inflation being a little bit sticky. We've got copper prices going up, oil prices going up. Just trying to get a sense of, and maybe it's too early, frankly, to even be asking us, but just trying to get a sense of what the appetite is in your supply base to take prices up again this year.

I don't know that I've heard about a lot of appetite. Now a couple of things, I think, that you should recognize. One is I think a lot of people look at the US steel indexes, I would tell you that we're more associated with foreign steel indexes, and those have not been particularly volatile, frankly. I think the US ones are behaving in a different fashion than the Taiwanese or Chinese ones. So, we're not necessarily seeing the steel inflation that people keep asking me about. Two, bear in mind that by the time fastener is made, shipped, and sold to the market up through the channel, the actual value of the raw material in the final product is probably one-third or slightly less of the total value. I know we're selling a slug of steel, but there's a lot of value-add wrapped on top of the initial raw material. As long as I've been here, steel hasn't really been a catalyst to raising or lowering prices. Transportation has been more meaningful. I don't think I'm hearing anything that says we're seeing rampant inflation in raw materials that we need to start thinking about raising prices.

In the fastener category, as Holden mentioned in his earnings release, it's important to consider the use of steel in our products. The impact of copper prices has been significant for our business. As FMIs grow within our operations, we are gaining new insights. I previously discussed the trends in vending and Onsite, and now I want to highlight our bin stock app, which accounts for approximately 13% to 14% of our sales and has a considerable concentration of fasteners. While there are other OEMs present, our other product lines also have OEM components. I can't provide a direct comparison to last March since we were transitioning from our legacy bin stock app platform, the MC70 devices. However, in April 2023, we recorded over 16,000 transactions per day, totaling around 320,000 orders for that month. The average order value was $232. By March 2024, nearly a year later, we processed 362,000 orders, averaging about 17,240 per day, at an average value of $216, reflecting a decrease of $16 or about 7% year-over-year. I estimate that two-thirds of this decrease is due to pricing, with the remainder attributed to underlying consumption, but we lack strong visibility on this. At the start of the quarter, pricing was in the low 220s, and it has now settled around the low 216s. The influence of Good Friday may have had some effect, possibly accounting for a point. Overall, while pricing is a concern in fasteners, as Holden noted in the press release, we are also facing a challenging demand environment.

I appreciate the color. Thank you. I'll pass it on.

Thanks.

Thank you. Your next question is coming from Patrick Baumann from JPMorgan. Your line is now live.

Hi. Good morning. Thanks for taking my questions.

Good morning.

I wanted to ask about something you mentioned in the press release. It says towards the back of your release it says like less store closures should result in an increase in growth of end market locations going forward. I see how that would make a lot of sense. I guess, I just wonder if you could address the degree to which store closures in the past have contributed to the Onsite location growth that you've seen. And then relatedly, what drives confidence that you can organically sustain that level of growth without the help of business coming over from the stores going forward? And maybe this is just a misunderstanding on my part of what's driven the Onsite growth in the past. If you could clarify that, that would be super helpful.

If there was a camera in the room, you would probably find it amusing to see Dan and Holden looking a bit surprised during a question when I gave Holden a certain look. I mention this because back in 2014, we realized we had too many locations for the market. We determined that a better approach for future growth was the Onsite strategy. We were careful not to rush into closing locations. These weren't large locations, and historically, our biggest limitation at Fastenal hasn't been the opportunity in terms of market size or financial capability; it has been acquiring and developing talent. That's why we have a careful recruitment process and our own corporate university to nurture talent, as this is what we offer to the market. This talent is supported by an excellent supply chain system to ensure effectiveness. We were cautious with closures because we believed that our talent could transition into other branches that were growing, as well as into this new Onsite growth area, since we had the personnel to shift. If we had closed several locations, we risked losing that talent. When customers view Fastenal like a hardware store and if we don’t have enough locations nearby, they might go elsewhere. Sometimes we closed branches in remote areas where our only reason for being there was due to two customers. We transitioned those two customers Onsite and subsequently closed the branch. However, in most instances, these two customers initially spent $30,000 a month with us each, but now they are spending $130,000 a month each, illustrating the effectiveness of our strategy. I may have gone off on a tangent more than you expected with that question, but it’s important to understand Fastenal’s strategy over the last 10 to 15 years and how it has unfolded.

It absolutely is. I would just look at the language to suggest our traditional branch count is likely to be stable to slightly up over time. As we add international, maybe there's the odd location domestically that we want to add every now and again, too. The primary growth in those end markets locations will be because of the addition of additional Onsites. You’ll just see the rate of growth ramp up because those Onsites keep coming on, and you're not having the reduction in branches. That's what that was intended to get by.

That makes sense. I appreciate the extra color there. Just a very quick follow-up on the Onsite signings. How did things progress through the quarter? And I'm asking only because last quarter, you said maybe some slipped out of the fourth quarter for whatever reason and could have been pushed into this year. So wondering if there was any evidence of that.

It was pretty consistent all quarter. I think March was the biggest, but I'd have to look back at it. Sometimes, when you have 40 numbers in your head, you lose track of the others.

Okay. Thank you very much.

Yeah. You bet.

And your next question is coming from Ryan Merkel from William Blair. Your line is now live.

Hi, guys. Thanks for letting me in. I just have one question. Dan, you said that change is hard, and you feel good about where you're going. Can you just unpack what about the change is difficult? Or what about the change is creating friction?

I mentioned earlier that we divided the US into two business units 15 years ago. If we were to present the numbers by business unit, you would see that there are two different stories unfolding in the business right now. The Eastern US is performing differently, and it's not a coincidence that Casey Miller took over running the US. About eight years ago, in the fall of 2015, I asked Casey to step away from leading our Southeast Central region, which includes Kentucky and Tennessee, and to oversee the entire Eastern US. Casey has done an excellent job. We don’t always agree, but sometimes that is beneficial. We discussed whether Casey should run the US business and place the right people in the right roles to achieve success in the organization. This quarter, our Western business unit performed negatively, while our Eastern business unit showed positive results. Our Onsite signings have not been evenly distributed between the Eastern and Western US, which has been the case for several years. Implementing change can be challenging, especially when a business becomes entrenched in success. I recall a few years ago, in the Des Moines, Iowa market, which was great for us. We became more focused on profitability and returns in that market rather than enjoying growth. Five years ago, we decided to shift our focus back to growth and expanding our partnerships while still making a great return for our shareholders. Ultimately, the best outcomes for our shareholders and employees come from growing the business, expanding opportunities, and increasing returns, and I’m pleased to report that we have achieved that. I’ll be discussing some of these points in more detail at the annual meeting, including the trade-offs we've made as an organization and how those decisions have impacted our mature business as we engaged differently in the marketplace.

Got it. Got it. Thank you.

Thank you. As a reminder our next question is coming from Nigel Coe from Wolfe Research. Your line is now live.

Hey, guys. This is actually Will Frank on for Nigel. Thanks for fitting me in. I guess, first on price/cost, pricing flat in the quarter. I guess do you think that you can say price/cost positive if pricing remains flat? And then maybe just if you could let us know how pricing was in the quarter ex fasteners. That would be really helpful.

Pricing ex fasteners remains positive. Pricing at this point is, frankly, within that kind of 0% to 2% range. You can kind of conclude that whatever we're negative on fasteners is being largely offset, maybe a little more than offset with non-fasteners. At this point, to be honest, the pricing environment is fairly unremarkable, which is why we're not giving it as much time and energy in our dialogue. So that's probably how I would characterize that. And I'm sorry, what was the first part I might have missed? Must have got it.

Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

Thank you again for joining us on the call today. We’ll be having our annual meeting here in a couple of weeks. It’s on a Thursday, I believe it’s the 25th, but I don’t have a calendar in front of me. I’d like to share a trip I did last week, got the opportunity to go out and visit our folks at Holo-Krome out in Connecticut. Holo-Krome is an organization we acquired back in 2009, it was in the process of being shut down and that production was moving offshore. We did not want to see the loss of a domestic manufacturer of their quality and their status in the United States, so we acquired it. I was pleased to have the opportunity to go out there and celebrate tenure. There were five individuals, and this is a business with over 100 employees. But there were five individuals out there who celebrated 40-plus years with Fastenal. We went there to celebrate that. All told, there were 20-plus people in that organization with more than 25 years of experience, a combination of Holo-Krome and Holo-Krome being a partner to join the Fastenal organization back in 2009. Great trip, great people. We keep finding people like that; we’ll be successful in this market for years to come. Thanks, everybody. Have a great day.

Thank you.

Thank you. That does conclude today's teleconference webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.