Fastenal : Q4 2022 Investor Teleconference Presentation

FOURTH QUARTER

2022

INVESTOR TELECONFERENCE

JANUARY 19, 2023

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SAFE HARBOR STATEMENT

All statements made herein that are not historical facts (e.g., future operating results and business activity, as well as expectations regarding operations, including gross margin, future inventory levels, pricing, Onsite and weighted FMI device signings, the size of our U.S./Canada network of traditional branches, operating costs, capital expenditures, digital footprint, and supply chain difficulties) are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially. More information regarding such risks can be found in our most recent annual and quarterly reports filed with the Securities and Exchange Commission. Any numerical or other representations in this presentation do not represent guidance by management and should not be construed as such. The appendix to the following presentation includes non-GAAP financial measures. Information required by Regulation G with respect to such non-GAAP financial measures can be found in the appendix including a comparison to the comparable GAAP measures.

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CEO MESSAGES ON 4Q22

20%

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

$0.55 $0.50

	Daily Sales Rate (DSR) Growth
	18.4% 18.0%
		16.0%
	14.6%
10.3%	10.0%	10.7%
	6.4%
	5.3%

2.8% 2.5%

(0.1%)

1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22

EPS

(Fully Diluted)

• 4Q22 DSR growth of +10.7% eased on tougher comparisons against the prior period and moderating demand. Against this backdrop and in our slowest seasonal quarter volume-wise, our 4Q22 operating margin was stable at 19.6%. Cash conversion returned to historic levels, reflecting normalization of supply chains.
• 2022 was a year of milestones: our eCommerce revenues surpassed $1.0B of sales; our international sales exceeded $1.0B; and our company-wide net earnings topped $1.0B.
• Sifting through quarterly noise, our DSR growth has been strong and stable: three-year growth (2019 to 2022) in 1Q22 was 28.1%, 2Q22 was 30.0%, 3Q22 was 30.7%, and 4Q22 was 34.9%. Our three-year incremental margin was 24.1%, and our operating margin rose from 19.8% in 2019 to 20.8% in 2022. We challenged the Blue Team to be better exiting the pandemic than entering it; the Blue Team delivered.

$0.45 $0.40 $0.35 $0.30 $0.25 $0.20

$0.43	• We experienced margin pressure in 4Q22. Fasteners were
$0.40	challenging, but understood, while other products fell more

$0.34	than expected. We attribute the latter to the nexus of easing
	demand, improved product availability, and the often
	unplanned nature of certain products.

$0.15 $0.10 $0.05 $0.00

1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22

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• Though headcount finished a little higher than we like, 2022 had strong labor productivity, with FTE growth lagging sales and profit growth due to hiring discipline and a focus on re- stocking our part-time ranks. We expect this to remain a priority in 2023.

4Q22 GROWTH DRIVER UPDATE

Onsite Signings and Active Locations

160		1,623	1,800
		1,600
140		1,416
		1,400
120	1,265
100			1,200
		1,000
80
	62	800
60
	44	600
	36
40		400
20			200
0	1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22	0
	Signings	Active Locations

Weighted FMI Device Signings and Installations (1)

10K			120K
		102,151
8K	83,951	92,874	100K
6K			80K
	4,730
		60K
		3,972
4K	3,548
	40K
2K			20K
0			0
	1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22

• Onsites: We had 62 signings in 4Q22 and finished with 1,623 active sites, +14.6% from 4Q21. Daily sales, excluding transferred branch sales, grew at a high-teens rate from 4Q21. Our 2023 goal is 375 to 400 signings.
• FMI Technology: We signed 4,730 weighted devices in 4Q22 (76 per day), versus 3,972 in 4Q21 (64 per day), with a final installed base of 102,151 weighted devices, +10.0% from 4Q21. Activity through our FMI technology platform represented 38.7% of sales in 4Q22, versus 35.1% of sales in 4Q21 and 27.2% of sales in 4Q20. Our 2023 goal is 23,000 to 25,000 MEU of FASTBin and FASTVend signings.
• eCommerce: Daily sales rose 48.2% in 4Q22. Large customer-oriented electronic data interface (EDI) was up 45.0%, while web sales were up 58.8%.
• Sales through our Digital Footprint (FMI technology plus non-FMI-relatedeCommerce) was 52.6% of sales in 4Q22, versus 46.4% in 4Q21. We anticipate we will hit 65% of our sales running through our Digital Footprint in 2023.

	(1)	Data excludes ~6.5K non-weighted vending devices related to a locker lease program
Signings		Installations

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BRANCH CONSOLIDATION

Branch Count

3,000

2,500

2,000

1,500

1,000

500

0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022	2025(E)
U.S. Branches	Canada Branches

YOY Branch Count Change

	2016	2017	2018	2019	2020	2021	2022
U.S.	(5.4%)	(5.4%)	(7.3%)	(6.1%)	(6.4%)	(12.6%)	(7.7%)
Canada	(1.0%)	(1.5%)	(4.6%)	(1.6%)	(2.2%)	(3.4%)	(2.3%)
Total	(5.1%)	(5.0%)	(7.1%)	(5.7%)	(6.1%)	(11.7%)	(7.2%)

• Total in-market1 locations were 3,306 at the end of 4Q22, up 3.0% from 3,209 at 4Q21. Our total in-market location count continues to grow due to a rising installed base of Onsites. In 2015, Onsites constituted 9.1% of our in- market locations; in 2022, they were 49.1%.
• Since 2015, we have seen a steady reduction in our traditional branches, primarily within the United States. Our focus on Onsites, shifting branch priorities, and the supply chain tools comprising our Digital Footprint have provided opportunities for network consolidation.
• Our U.S./Canada network will likely trend toward 1,450 traditional branches by 2025.
• At our peak United States branch count in 2013, we believe we had 30-minute access to 95.0% of the U.S. manufacturing base. We anticipate it will approximate 93.5% at our target branch count of 1,450.

• In-marketlocations include traditional branches, international branches, and Onsites

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