Fastenal Company (FAST) Earnings Call Transcript & Summary

Good morning, thank you, everybody, for attending Fastenal's 2025 Analyst Day. I appreciate you making it out. It's been a while. I think the last time we did one of these is 2018. So we're overdue to share a bit more about the story, but I think it's very timely. Before I kick off, I was asked to remind you parking purposes, in the parking lot out here, you do need to validate downstairs. It is complementary parking, but you have to sort of check in with the barcode that's down there. They have a code, and that will take care of that. But they do want people to check in that have parked in the parking lot. So getting that out of the way. Sharing a little bit about our schedule up here. And before we kick it off, I wanted to share a little bit of perspective about the content that you're going to hear because it's a lot of speakers talking about a lot of different things. But through all of the individuals and business leaders that are going to speak today, I think there's 2 key themes that is going to sort of sum up what we're trying to convey. The first one is simply alignment. We have, in recent years, been migrating our model from how we think of it going from an active account strategy to a key account strategy, something we've called Focus 40. You've heard of it before, but we haven't really done a dive into what that means. And I think you get a little bit more of a picture about that. But you're also going to hear how we are really integrated today in terms of how our field selling resources and our corporate selling resources operate and function as a team in a way that I think is sharper today than it may have been a couple of years ago. And so I think the first thing you're going to hear about is the alignment of our operation, the alignment of our business towards this key account strategy and moving together as one team. I think the second theme that's going to run through this is our toolbox. You're going to hear us talk about the development of existing capabilities that we have as a business as well as the development of new things that we're doing as a business. One of which just so you know, just to maybe jump ahead a little bit is in front of you -- what you have in front of you as the takeaway is what we call a Click. Jeff Hicks will talk a little bit more about that development. It's a lot cooler than it looks just sitting there on your desk. But we're going to talk a lot about how we're developing the existing toolbox, how we're developing new things for the toolbox, and that's going to be a big part of the theme. And it's going to talk about what drives success at Fastenal. In many respects, for the past few years, we've been talking a lot about Onsites, Onsite signings. Onsites are incredibly important. But the reset we'd like to have with you today is to talk about what drives success is not an individual tool, but a range of tools in a toolbox that when integrated into a solution site by site on a global basis for our customers is the most effective toolbox in the industry at reducing the cost of our customers' supply chains, reduce risk of our customer supply chains and improving the scalability of our supply chains. And when you think about what allows us to succeed, it is the totality of the toolbox that we've invested in over the years and continue to invest in. And we're going to have a lot of conversation about how those investments are continuing and where they're going to lead to. And I think where we'd like you to walk out is to be as excited about the prospects for our growth over the next few years as you've been. Because I can tell you, at Fastenal, we are as excited about the next several years of growth and what we're developing and what's going to drive that as we have been in several years. I think we have a lot of things that are going about. So when we get through the speakers, Dan will close, and he'll talk to you a little bit kind of the conversation about the new customer bucket data that we touched on last quarter. He's going to add some additional perspective to that. When we report our first quarter earnings, we'll be providing you deeper details about what the customer bucket data looks like with some history to it. And so he'll close with some perspective on that. The only other thing that I would ask of the group, about 1/3 of the time today is on Q&A. And so we have speakers, then we have some time to ask questions of the speakers. And then at the end of the day, we have 30 minutes set aside to ask questions off Dan, Jeff and myself. What I would ask of the group is this is intended to be a discussion about the strategic direction of the business. And our business unit leaders are excited to talk about what they've been doing, how they're driving what it is that they're responsible for and how that's going to drive Fastenal forward and continue to drive the growth of our business and continue to drive what has historically been a strong compounding story and will continue to be a strong compounding story. But I recognize that this room has models to build. I recognize that there's a lot of current events that there's questions about. My question for the room would be for the individual business unit leaders that work so hard to drive what it is they're responsible for, if we can keep the questions on more of a strategic nature, and if there's questions that are a bit more topical in nature, let's hold those to the end when Dan and Jeff and I are sort of holding court. That would be what I would ask. So if I feel like a question gets a little bit too current while we have the business leaders up, I might say, can we hold that off. And that's how we'll approach it because I know that -- I want to make sure that we have an opportunity -- you don't get access to the folks sitting here in the back of the room every day. I want to make sure that we're giving them the ability to show off what they do because it's very, very important. With that, this is our schedule. I hope you enjoy it, and I will hand it off to Jeff Watts.

Thanks, Holden. I guess what you meant by that is hold the tariff questions till the end, basically. Hold the tariff question till the end is what you're saying. I got you. Good morning, and thank you all for coming. My name is Jeff Watts, President and Chief Sales Officer for the company. I've met a few of you, but Dan and Holden though it would be a good idea if I spend some time giving you some background on myself and my journey with the company. So February marked my 29th year at Fastenal. When I think back to that time, right before that time, actually, I was sitting behind a desk. I just graduated engineering, looking at a bunch of drawings and all I could think about was there's no way I can do this for the next 30, 40 years in my life. And I became good friends with the city engineer, and I worked for the government, so that might have something to do with it. But I became good friends with him. And he always come to me and said, "Jeff, you should look at sales. I did sales, got into politics, now I'm here." They kind of stuck with me. And surprisingly, a couple of days after that conversation, the first one, Fastenal called me. They just opened their second location outside of the U.S., in Canada. And they called me in for an interview. And I was like, this is fate. Just talking about sales, a sales job. They just called me, not sure how they got my number. But I went into the interview, and when I got there, my excitement level kind of dropped a little bit. To me, it looked like a hardware store. I'm like, oh, boy, here we go. And it was funny because the district manager did a great job explaining to me the opportunity. The entrepreneurial type mindset and the ownership that you get at Fastenal. He did such a good job, I ended up quitting my engineering job, started with Fastenal. And over the next 7 years, I moved 6 times, ran 2 branch locations, 5 different districts. And right when I thought I was getting settled down, for me, it was 12 months in the same location, I got a call from the RVP. He's like, Jeff, you've ever been to Europe? I'm like, yes. He's like, do you like it? I'm like, yes, it was okay. Why? And he goes, we have a customer -- a couple of customers, they need our help. Need our help in Europe and we're going to open up European operations to help them and we want you to do it. I kind of laughed and I said, thanks but no thanks, politely, hung up the phone, and I thought that was it. And a couple of hours later, the CEO at the time called me. Long story short on that conversation, it was about 3 minutes. Somehow, I'd agreed and 4 days later, I was in Rotterdam, looking for a place to live, kind of asking myself what the hell I've done. Regardless, a couple of things I learned in Europe. A couple of things that were important. First one was when we say we're partners with customers, we truly are. And we really did this to help support our customers in Europe. But the second thing for me was there's a huge opportunity here. Huge opportunity for us. When I looked at the competition, it was very fragmented, very transactional. For me, I looked at it like an opportunity. And about 2 years in, we just got -- we just became profitable in the business unit. We're getting -- I got pulled out of the business unit, back to Canada to be the Regional Vice President of the country. But my international days weren't over. In 2015, I became the Executive Vice President of our International business, which at the time, it was about $420-ish million in revenue in 15 countries. And then here, you can see the growth rate, and I'm not trying to -- this isn't about me, but if you look at 2015 upwards in our International business, we grew basically 12% every year. And I get one question a lot. I get a question of why? You have so much opportunity in North America, specifically in the United States. You have so much opportunity, why don't you focus there. You've get great returns there, why don't you focus there. And for me, it's always been about a partnership. A lot of people say they can be partners with people, but if you can only be a partner in Illinois, Indiana, Michigan or just maybe the United States, it's really not a global partnership. And part of the things that's unique to us, at least in my mind, is when we say we're a global partner, imagine you have a manufacturing facility today and you're in Chicago, but you also have sites in Mexico and Romania, Poland, maybe Malaysia. We're unique in the fact that we can offer something that no one else in our industry can offer today, consistency. So we can offer consistent service, consistent solutions, most of the time consistent product. And the best thing is from your desk in Chicago, you can control it all. You can see live inventory use. You can see usage, who's using what. All of that data is live for you and you can control it all from, like I said, your desk in Chicago. And that's unique. No one else in our industry today can provide that. But the other exciting part to that number, only about 50% of that growth-ish is coming from those partnerships. The other 50% is coming from new partnerships with European companies, Asian companies and American companies. And to me, that's exciting. The other line you see on here is Mexico. There's a reason I bring up Mexico. If you look at how we run our business in the U.S. and Canada, how we go to market, very similar. The only real difference maybe is some languaging in Quebec with French on it. But for the most part, very similar. When you go to Mexico and you look at the model there, and it's been successful, and their average growth rate is over 17% every year for the last 10. If you look at that business model, how they go to market is much different. It's important to point out. If you look at that model, really what they do is their success is based on -- their focus is based around large key account business. It's all they focus on. That's their vision. And the one great thing about this business unit, number one, it's a platform for the rest of our international, but they're very aligned. So from the day you start in our Mexico business unit, you understand what the vision is. You understand your role in it, every role in the company in Fastenal Mexico and how we're going to succeed. And I always relate it to football, I'm a hockey guy. But for football, on the offense, everybody has a role. And if someone misses their role for -- the lineman misses the block, no play. The receiver runs the wrong route, it's incomplete. The same way with Fastenal, their vision there is very, very aligned. And what it creates, honestly, what it creates is ownership. It creates some of the best employees we have when we talk about ownership. I can prove it because right now, our Senior VP, Europe and Asia, is from Mexico. Our Regional Vice President in China, in Southeast Asia, both from Mexico. We developed extremely, extremely good people. And why I think it's important is -- a lot of the Fastenal people here are probably sick of this slide. But I think it's important when I got into the Chief Sales Officer role back in '23, it's always been kind of in the U.S. business. I understood it, me and Casey, Bill, very close. But I never paid that much attention because I was focused on the other 24 countries. But when I got into it, I started to see one major problem. We aren't aligned anymore. Everybody was working very hard. Every department was working hard, but they're all working to their own type of goal, their own vision. And I'm told that in big companies, that's pretty normal, that happens. But it's not normal to Fastenal. So one of the first things I did, I sat down with the group and said we need to get aligned. As a company, we need to be aligned. So let's start with our sales group. If you look at our sales group outside the branch network, really what the important part for me was we started to have more alignment on that. So you look at our contract sellers. Our industry specialists, our lean implementation, those groups, we need to get those lines. We brought them all back under one individual, Bill Drazkowski. And when we sat down with Bill, like when were we most successful with this group? We were most successful when we take those teams and we align them with our regional business units. It's one thing if you're at this part of the country and you're flying back and forth over with your account base, but you're really not part of that local team. So it was important to us to get back. And you could see our -- part of the reason we looked at it is our contract signings have kind of flattened. It really flattened out. But if you look at our contract signings last year since we made these changes, they've exploded. Same with our solutions, same with our Onsite signings. A lot of that has been a benefit of the realignment we've done. Now the second part of that, we looked at our operations, and this is a good one. We looked at our operations, and they were again working extremely hard, but they were working very hard to be operationally efficient in their business unit. Then weren't looking at the company as a whole. And I'll give you a good example. So we ran some data, and we looked through it, and we looked at our biggest accounts, our biggest brands, and we were like, where are we spending the most time in these branches? What parts are we really looking at? We looked at it, kind of extrapolated it out. There were about 15,000 SKUs of fasteners, very standard fasteners. We were spending a tremendous amount of time on in the field. We didn't class it in the distribution centers. And those 15,000 SKUs didn't add up to a lot of money. But every month, we were cutting over 17,000 purchase orders from the branch, average purchase order, about $96. But you think about the time involved with that. So we looked at it. Well, this is a simple fix for the field for our customers, let's bring this inventory in. Went to Holden and it wasn't a big number, so he didn't [indiscernible] too much. We brought the inventory in, and that was at the end of Q2 last year. In January, we cut down those POs by 4,000. 14,000 POs saved in 6 months. And why is that important? Well, it's important because we're more efficient in the field. We're not spending as much time. We're trying to get with our customers. It's important to us to spend more time with our customers than sitting in a branch cutting appeal for $96 for a standard fastener. That's that part. Then we moved on to IT. And I traveled around and met all of our IT people, and I truly believe this, went to India, went all over, met them all. I'm not an IT guy, not a tech guy by any means. But I truly believe, and John knows that, he throws words at me, goes over my head. But I truly do believe we have some of the best tech people in the industry, if not in the world. But the questions I kept getting from them is, Jeff, where are we going? What is our vision? What are we looking at? Because we don't really know, and we're doing the best we can without it, and it kind of dawned on all of us. We're not fully utilizing their talents because we're not aligned. The vision isn't there right now. So about a year -- just over a year ago, we all sat down and we thought it was really important that we developed a strategic plan for the company, not just for this year, for next year, but for the next 3, 5, 10 years. We spent a lot of time doing this. And a lot of it is going to be based around -- when you think about it, most of our growth comes from our large accounts, but we need to understand what they need. And we need to base a lot of our planning and resource around what our biggest accounts need and it flows down. So what you're going to hear today from the group, you're going to hear a glimpse of this. You're going to get some more detail on where we're going. And why I think it's important is, for us as a whole, our teams being aligned, they need to have that goal. Without it, we can't execute. And everyone knows that. So please, when you hear the presentations today, you have questions to ask. We're very excited about this plan. And really what it represents to me is a pathway to $15 billion, $15 billion company. That's really what our vision is to become that type of company. So with that, I'm going to hand it over to Casey, and we'll get the ball rolling.

Thank you. Okay. Got the mic on. Can you guys hear me? I don't need a mic in the room this size, but maybe the mic will help me a little bit. So my name is Casey Miller. I've been with Fastenal for 26 years. I started right out of college. I was working at Toyota. I went to Georgetown College in Georgetown, Kentucky. That's where they make the Camry. So I was working at Toyota in the public relations department, of all things, it was just a pretty good job. I mean it was good hourly rate. But I knew I didn't want to be in PR because they would cut our department every time they needed to save any money because we just weren't very important. And I knew I didn't want to work in the factory. So I knew I was going to have to find something. So I started talking to a lot of the vendors that were coming to Toyota delivering parts. And we're an MRO supplier for Toyota's still today, and just started interviewing with the various companies that did business with Toyota. And I went to work for Fastenal, and it was a weird story. I go to the interview and I sit on a keg of bolts and talked to the district manager about the opportunities, and I kind of blew it off. And then I went and met with my economics professor and he's real big on investor, you guys love him. And he said, you need to go to work for these guys here. And I'm like, why is that? He's like, they're growing the fastest. And you've got a good line of BS. You probably need to go work and sell for these guys that are growing faster than everybody else. So that's what I did, and it's worked out really well. So I appreciate Dr. Claude Bates giving me that advice. I started in outside sales. I've been a general manager. I've been a district manager. I took over as Regional Vice President. I moved around a little bit. I took over the Eastern business unit from the EVP standpoint in 2015. In the middle of 2023, I took over the entire U.S. So I'm responsible for the U.S.-based branches and Onsite branches. So that's sort of my history. So this is our old CSP model. So this model was our active go-to-market strategy from, call it, 2004 to around 2020, very much like a hardware store. When you walked into a Fastenal, it felt like a hardware store. And the idea was to drive as much activity as we possibly could and get any customers to buy from us as we possibly could. And it was a lot about providing a same-day solution. So the customer would say what they needed, we would possibly have it in the market, they get it the same day. You build some loyalty like that. If you look at our customers today, they spend a lot of money on the ERP systems not to have emergencies. So the emergencies became less and less common, more and more of this trade went online. And at the same time, we're building this wonderful key account business. We've got vending. We're building our Onsite network. You look at things like Fast 360, our ability to do EDIs. I remember our CEO at the time, I think it was in our trade show and our customer -- I'm sorry, our employee trade show, I think it was 2011. He said, we're going to become the best key account supplier in North America, and we did. And so we're becoming the best key account supplier. This model just became obsolete because you're dedicating way too much labor and way too much of our occupancy to a shrinking portion of our customer base. So we're seeing less and less walk-ins. The walk-ins that we are seeing are spending less. So we needed to change the game and prioritize the customers that were driving our revenue growth. So that led us to where we are today. And this is about 93% of our U.S.-based locations. So this is our customer fulfillment center model. What this is, is a location that stands alone as a supply chain partner for the key accounts in our industry. The point of this -- of our locations to acquire and grow key accounts. In front of you, you've got some information about the buckets. Holden and Dan talked about that at the last quarterly update, so you understand why it's so important for us to be able to drive key accounts. What I'll tell you that you don't see just looking at this on the surface, and I hope as many of you as possible can come to our branch today, is what this does for role specialization. Role specialization is critically important for 80/20 implementation. You have to have role specialization. And what this does for us is allows us to specifically tell an employee what we need them to do in a day. We work very hard with our HR department to have the right roles for the branch network, to have the right job descriptions for the branch network. When we had a retail environment, that all went out the window as soon on as my dad comes in to buy some Ninja gloves. I mean we've got to get them out of there, somehow some way. We have to service that customer. They're in our face, we have to do it. What this allows us to do is your warehouse associates are packing orders, your supply chain associates are cutting POs, your sales associates are getting ready to do sales calls. They're researching their customers. Our account specialists are figuring out how to grow their business. We can route plan out of here. And this is very important. When a key count does come in to this environment, they take us seriously as an industrial supplier. I have multiple meetings with customers where we're going after their OEM fastener business, and they're like how can you handle my OEM fastener business? You look like a hardware store. I need OEM fasteners, I need safety supplies that I'm using over and over and over. This goes right along with our key account strategy, our vending strategy, our Onsite strategy. Most of our Onsites don't allow us to keep all of our product at the Onsite. It would be wonderful if that happened, but they're just not that willing to give us all the floor space that we need. So we have to have inventory in places like this. So we've also done this. We've reduced our U.S. branch count very, very significantly. As you rationalize the network, one thing to realize is to service key accounts, you need bigger teams in each location. A big part of role specialization is you have to have more roles. You have to have more people. So as we walk away from the retail side of the business, we need less locations, but we also need bigger buildings, bigger teams, more folks. So that's why we rationalize the market. But here's the good news. We're still within a 30-minute drive of our industrial manufacturing base. So Bill is our boardroom seller. Bill is who we put in the boardrooms, both of those Bills. So just Bill. If it's important and we go to the boardroom, that's Bill. If it's a great, big plant, they send me. I'm used to selling to plant managers. Really big plants, talking to plant managers, talking to plant controllers, that's what I do. That's what the regional vice presidents do. We streamline the supply chain. The reason that 30 minutes is important is as soon as I tell a plant manager we're within 30 minutes, he or she is happy. That makes them happy. That is the warm, fuzzy feeling that they're looking for from a supplier, and we're almost always closer than anybody else because the locations we have. That's still a lot of locations. That's still very, very competitive and it puts our people in front of our customers and very, very close. And again, that 30-minute drive is really important. And that's what we look at as we look at the network. So we talk about Focus40. Holden is right here for a reason because if I make a forward-looking statement about Focus40, he's going to hit me with something, so we can't do that. This isn't a projection. I'm not predicting anything here. But the reason that we put the Rule of 40 is if we look at a time when we don't have a lot of economic headwinds and we look at performance, our best districts and regions hit the Rule of 40 is what we call it. So you look at your growth in your pretax percent of net sales, and we're looking for a number at or above 40. And that's what our best regions and districts do. So that's what we're focused on. These 4 pillars are critically important. We have a Focus40 playbook. These 4 pillars are all over it. We actually have a Eurasian Focus40 playbook, very similar pillars. We live and die on these pillars. These pillars are so important to what we do in the branch network, and they're all important, and they all work together. Sometimes in different business units, one pillar may be more important than the other. What I will tell you in the initial implementation in Focus40, and I'll talk about where we are in the West, the market perception plan is really important. What you say you are to the customer, what you say you are to your employees, critically important. Where we are in the East right now is really focused on specialized roles. We've got the titles that we need. We worked with HR. We have to make sure that we're using the titles properly to drive key accounts. So the focus on selling is always there. Different pillars have more importance based on where that business unit is. But at the end of the day, we have to see the KPIs. Market share gains are critically important and labor efficiency, asset [indiscernible], all of that is very, very important. What we've worked with HR to do is align our pay plans to match what we're trying to accomplish with Focus40. So our pay plans are aligned where before our pay plans were antiquated based on the old model. We've gone through each of our branch titles to align our pay plans with what we're trying to do at the local level. We have to find more key accounts or supply chain partners. That's how we look at it. At the end of the day, we have to grow the ones we have, and we have to acquire more. And the branch has to focus on those things each and every day. This takes you through the time line. I mentioned I was responsible for the 2015 to 2023. I don't know if we had a globe when we decided what was the East when I took over because I had Southern California, West Texas, Arizona. So when we talk about East-West, it's not -- I'm sure L.A. is East to somewhere, but it was very odd. So we started in Phoenix. We had 13 branches, weren't really tearing it up, not making a lot of money in Phoenix, and we started to consolidate the branch network, grow the teams and really specialize the roles. Today, that's a very, very good business for us. And then you can -- we did an 80/20 project in Wisconsin, Illinois, had a lot of leadership changes. So that kind of fizzled out. So we moved that project to Houston. That's really where we flipped from an 80/20 mentality to a Focus40 mentality. We fastenalized the 80/20 principles. And from there, we've implemented the Eastern business unit in 2020 through 2022. And then we've really added the West in 2022 until now. So that's sort of the time frame. There are some other things unlike Project Cali, which was just doing the same thing in Southern California that we did in Phoenix. We spent a lot of time looking specifically at our Tijuana-based district. I was very intrigued by some of the things that they were doing. We didn't do all of them, but they were having a lot of success with some things down there that we're currently doing in the U.S.-based business. We obviously can't do everything, but there's some things that they did that really influenced our strategy. So I mentioned the East is slightly ahead of the West in terms of implementations. So we're about 2 years ahead in the East versus the west. The best comp for the Eastern business unit is the Western business unit and vice versa. I mean they're very, very similar in terms of opportunity, market potential, things of that nature. So you want to see, is the plan working a little bit better in the East than it is in the West as we're a little bit further along. So you're just looking for performance. And what I'm going to point out here is, obviously, we're growing a little bit faster. The pretax is growing a little bit faster. But what I would point out is the ROA line as well as the pretax percentage of net sales. I've always been in the East from day 1. I started in Cincinnati. I was working in the Indianapolis region. I ran the Southeast. So I've always been in the East. And we have always been behind the West in terms of pretax percentage and everything else in ROA. And Dan pointed that out quite a bit through the year. So I mean it was something that kind of stuck in my crawl a little bit because we always trail the West. Well, what's exciting about Focus40 is because of the way we're approaching the network, because of the way that we're approaching the branch structure, we're actually not only competitive with the West and the East, the business units are very comparable and the East has grown the pretax a little bit faster. So that's been really, really good to see. And it's exciting to see that happening now as we've implemented some of these strategies in the West. So it's more of a check than anything else just to make sure that the strategy is working, and it's advantageous that we're a couple of years ahead in a business unit inside of the same country. So we still look at the East and West separate today. Yes. You yell at me about the pretax in the East, okay. Sure. There's about a 600-basis-point delta right now in terms of the East and the West from a monthly growth that we're seeing on a daily average. So it's significant. You come out of things a lot quicker when you're focused on those key accounts. So last 2 slides, and then we'll let somebody smarter talk. I look at the business unit, and I don't get to talk to you guys very much. I look at the business unit or the business through a very district-centric lens. That's how I look at the business. So there's a lot of vehicles that we use to take market share, whether it's Onsites, CFCs, our customer fulfillment centers, we do have some CSPs, customer service branches where we still have the retail field. We have some cust codes that we use is kind of Onsite hybrids. We have Gov codes. We have strat codes. All of those vehicles that we use should equal growth in a market. We should see growth in a market. We should outperform our competition. We should grow faster than the economy. We should see outgrowth in every market, and it needs to happen in a way that we're able to leverage our labor, we're able to leverage our assets, we're able to leverage our occupancy. And so we have 170 districts in the U.S., and they're all contiguous. They're all part of a geography. So by looking at district performance, I know how we're performing within a geography. If I want to know if we're taking market share in Pittsburgh, I can look at how the district in Pittsburg is performing. If I want to look at how we're performing in Western Kentucky or Western Tennessee or a rural market, I can look at how we're performing. And we do a really nice job of defining what the market potential is within these markets for things like Onsites. And so we can see are we taking market share. And because we look at those district success measures and those KPIs really never change, we can see how we're performing over time in these geographies that we call districts. So this is the view that I see. And we talk about decentralization a lot. And what I want you to understand is decentralization is great and we give you a lot of freedom to take market share. But we also have nonnegotiables, things that we're going to do in every single market. And those nonnegotiables are based on these KPIs. And so the nonnegotiables are these. We are going to do this. You've got a lot of room for creativity around these activities, but you're going to do this stuff. So you're going to have a successful CSC program, that's our customer solutions consultant. We have 170-plus of these today. I think that we'll probably get to somewhere over 350. We'll have a couple of these per district, some districts may have 3, some districts may have 1. But these are the people whose job it is to acquire key accounts. That's all they do. So the general manager has a Target 5. Those are the customers that they're focused on that, that's going to help them hit goal this year. That is -- the Target 5 is designed. We can grab these customers. We can get them buying, we can grow them this year. That's how we're going to try to hit goal in the branch. The district manager better be able to sell to key accounts. Our DMS have to be able to sell the key accounts. But you look at the general manager role, the district manager role, they got a lot going on. The CSC should be as good a seller as the district manager or better, and all they do is acquire key accounts. That is it. That is what they do. And every single year, they start at 0. They only get paid if they grow. It is a growth-oriented position. The Onsite development specialist is -- don't get tripped up Onsite. They can work on any large key account in a district. The ODS is responsible for developing, growing, implementing large key account business within the district. So these 2 guys make a lot of promises, Bill and Bill. I mean they go tell the key accounts, we're going to do all kinds of great stuff. A lot of that falls to the ODS and the lean team to get that implemented. We have to make sure that whatever we tell our national counts we're going to do, whatever we tell our regional accounts we're going to do, those promises are kept and those promises help their business, help them build more widgets. Whatever they're trying to accomplish inside their organization, we have to make sure we're doing that. You have to get growth with the 10,000 plus. You've got the bucket sitting in front of you, so you understand why that's so important. The third one with vending is really, really important. If you show me 2 districts, one's got 38% of their business running through vending and another one has got 20, the one with 38 is going to perform better. So we have to prioritize technology when we go to market. We have to be the best at EDIs. We have to be the best at vending, the best at RFID. That is vitally important. But you have to deploy those solutions with your customers because we see performance. It's related to performance. The district managers that do a better job with technology perform better over time. And I know that seems really intuitive, but you have to keep it in the district manager space. We're like baseball players, we count everything. So we know exactly who's performing where with what initiative, and that's a big one. It might seem like a nondecentralized thing to do to say you have to grow with technology, but it's so highly related to performance. It'd be malpractice if I didn't do that. So we really push the technology with the DMs. And then the last pillar is making sure that the GMs are on offense, growing the Target 5. Our largest expense line in my business unit is GM payroll, so they better be growing. They have to help us grow because that's what ultimately drives the company forward, and that's what we have to do. I really appreciate everybody comment. I'm going to turn it over to the professional speakers now. Thanks for listening.

Thanks, Casey. Good morning, everybody. Holden, he talked about promising. The promise I didn't make to Holden was I had to keep within my time limit today. So we're going to do our best to hold that promise, right?

We're actually ahead of time.

Ahead of time. That's unusual. So yes, you cut my 100 slides down to about 8. So that's a blessing for you all. So you know he's thinking about you, and he wants you to have a good experience here today. My name is Bill Drazkowski. I'm the Executive Vice President of Sales. So what I lead are our contract sales teams and all the teams that support our key account customers. So you heard Casey talk about a number of different teams like our CSC teams, our lean teams, our safety teams. Wherever they are in the world and wherever our customers are in the world, that's where those teams are living, trying to go make an impact with their customers today. I've been with Fastenal for 29 years. Jeff and I were traveling earlier this week together, and we discovered that Jeff started before me, so he's got me on a little bit of seniority. So what I learned this week was Jeff beat me, right? He got here first. So the reason I started at Fastenal in the first place, I went to college at a school called Winona State University. And during that time, one of the things that I did, I worked part-time at the local sports center. And in that, I coached a lot of different sports. Well, as you're coaching sports, you meet a lot of kids, you meet a lot of parents, you meet a lot of families. And in that time, as you're getting to know these families, some families kind of stood out. Their kids were really engaged. The parents were really involved. And a lot of these parents and folks worked for a company called Fastenal in town. And I got to hear the story about how they wanted to grow their business, about the opportunities, how obsessed they were with competing in the market, how they were just building something. And as a young economics and business administration student, that was very appealing to me. And then I was blessed to be given a book, Bob Kierlin's first book called The Unified Theory of Life. And it talked about his business philosophies, his philosophies on free markets, his philosophies on, hey, the ownership you're allowed to take in the business, the building you're able to do. And that just really appealed to me. And I can say that the day I started with Fastenal until today, those same values and that same approach still is there today. We still go out and compete every day at that high level. We still go out and build businesses like Casey talked about today. And we still get to go out there in the marketplace and continue to try to build, develop people and create opportunities for all of our people. And so those things that we were built upon and started upon that belief in people, it continues today. And people like Jeff, Casey, myself, Bill Reichenbacher still here today and being with the company so many years -- and Bill has us all beat, by the way, the other Bill. Tell me that's not confusing when we go on a sales call, right, Bill, and we're both kind of looking at what's going on. But it's those things that we're built upon, we still get to carry on today. So today, I get the pleasure of talking to you about our contract sales teams. And really, one of the things I believe in our February release, you probably saw, I believe for the first time, we showed contract sales versus showing just national account sales. Because we have more bits than just our national accounts or our multi-site customers. I'm going to get into a little bit of that today. But before we do, one of the things I want to talk about when we talk to a customer, what is our mindset? Where do we start? What's kind of ground zero and how do we go to market? Really, our noble selling purpose is really simple. Our goal is to go into a customer and understand their business and figure out how a customer's business could be better because they decided to do business with us. That's our sales mindset. So whatever we invest in, whatever we do, when you hear from Jeff and you hear it from John and you hear it from the different folks in our technology teams, that is what they're obsessed with helping us do, right? Things that we can put into place that help our customers' business get better. And then we have to continue to do that, continue to improve it and continue to tell that story to the customer year after year, quarter after quarter, and that's how you keep your business and your customers sticky. So that's what we're obsessed with. So as you listen to the speakers today and you listen to some of what we talk about, just listen for that theme, is that happening? Are these models we're doing, doing that? When we talk about branch or Onsite or what those models are doing, is it helping us do that? That's the purpose behind what we do. And I think that's so important because that keeps us really focused. And also to what Jeff talked about, really, really aligned. And when you think about -- I'm going to pivot a little bit to how we talk to our teams internally. And we put on here what's our contract sales mission, so to speak, right? And Casey talked about our branches and network and what they do. These teams, these contract sales teams, they live outside the branch, which means they're responsible for multiple branches. They're making decisions not just for one business unit, but for many business units. And so when we talk about our national account teams, our government team, our lean teams, really what their expectation is, is they have to be a growth driver. We have to be able to grow faster because they exist than without us. And the day those teams can't do that is the day we should not have them. So our goal in contract sales is we have to always be in the mindset of we are here to help a branch, a district, a region and the company grow faster with us than without us. That's the purpose. And by tying these locations together, that helps us to do that in a really, really efficient way. And so second, we talk a lot about internally the power of Fastenal people. And Casey got into a little bit of detail of the branch and the setup and the role of specialization. Well, when we sign contracts and we come to agreements with customer, we do those promises Casey talked about. The best sellers we have in the company are the ones that are always closest to the customer because they're making things happen. And so we have to understand what our teams have to do -- what they have to be great at is communicating with those teams what the customers' expectations are, how that business gets better, what we can do better. So we have to be in the mindset that utilizing those teams, communicating with those teams and knowing that they can be the best sellers in the market if we help them become that, if we give them the right contracts, the right vehicle, the right contacts, the right support, that can happen. And finally, when you think about ownership, just like when we talked about, Bob Kierlin, the reason I started at Fastenal, right, that ownership piece, it's a little bit like he gave us a business lab. Casey, myself, Jeff, we got to run our business labs, our branches, our -- we got to go call on customers and build a business with somebody else's money, with Holden's money, right, or the shareholders' money, more importantly. But that ownership is essential. And I'm going to get into why that's so important as we talk a little bit as we talk about why we had to make some adjustments as a couple of people mentioned back in 2023. Now second, when you think about what our mission is and what our sellers are doing, we talked about our purpose. But when we get into that boardroom, we get into that plant's office, we get into that maintenance department, wherever the leadership of that company is, what are we doing? Well, the first thing is we're trying to establish Fastenal as a strategic supply partner. That's what we're -- that's the rapport we're going for with customers, right? No matter what type of customer, you hear about key accounts, things like that. So what we're really trying to do is to forge a partnership together. We can use contracts to do that. We can use great service to do that. We can use technology to that. All these things are used to do that. But that's #1 goal. Second, engage with local leadership. And that's critical. And that's probably where things might have -- we didn't do as well at that in 2021 and '22 as I believe we're doing today, okay? So making sure that we connect like that is critical. Third, and this is really -- I think when you think about things that separate Fastenal -- because of that footprint, because of that network, you may have a customer that has a headquarter location and we sign a contract. They may have 10 locations across the world. They might have 5. They might have 55. And as we know, states have different laws for labor. States have different business rules. Countries have different rules and laws. Even within some portfolios, if our customer that we came to an agreement with is a private equity, they may have plants that have different types of cultures. You may have some union shops in that mix. You may have some nonunion shops. You may have some in states that are easy to work with, some of that might be more difficult. So what we have to be great at is and we have the ability to do like nobody else is we can go into each individual plant and propose the best solution for that business at the plant level. And then we aggregate all of that together and the customer at the corporate level sees what we are saving them, what we are doing, how we are making their business better because they chose to do business with us. That's a critical component that I don't feel many people can do consistently across the globe wherever we do business. Next, customers give us a vision. So when we talk about when -- and Bill is going to get into this quite a bit when he talks about what our sellers are doing in front of those customers. But us, our ability to communicate that vision to each of those plants is critical. Those are exercises that we are doing every day, whether you're a national account seller, a CSC, whether you're a government seller, whoever you are, that's what you're working towards. Here's where we need John and Jeff and some folks who are here with us to be great, and we mentioned we have great technology teams. But we're always looking to prioritize innovation and continuous improvement. So if we start with the binstock, we start with a certain technology and we come out with new technology, our customers expect us to always be innovating for them. They want to know the latest and greatest thing. Just because something worked the last 5 years, how are you going to make me better for the next 5 years? That innovation at the site level is critical. And finally, maximizing profitability in the contract. We utilize a lot of our specialists, our teams to really do that. So above all else, we have to utilize our contract to drive sales and ultimately drive profitability. Now I'm going to get into the buckets. So you saw in the February release, we had a contract sales number in a percent. I'm going to go into what these contracts are real quick, so you understand the buckets. So first, we have our national account customers. A number that you're probably familiar with in a number of releases, right, our national account team, the multisite contract customers. That makes up about 61% of our sales. And this is all 2024 data, but did about $4.6 billion in that bucket. So obviously, organizationally, we spend a lot of time with those customers and a lot of resources go towards those customers. And when Bill Reichenbacher goes through things, he's going to go through our multisite our national account sellers do. So we do have our boardroom or our sellers, right? But we also use that name SDS. Well, not every contract needs an owner, we might have some contracts that are pretty light at administration. We needed some people to run what we call some house accounts. That's what that program is, but they run our house accounts as well as they help our regional vice presidents with some single-site support. The second bucket, the regional program, that's just a single site. That's where you have the corporate headquarters and the factory in one building, and that's it. You have one. So our regional vice presidents, our CSCs, our district managers, our local market managers. They're the ones that are going after those single-site contractual accounts. And that bucket is about 6% of sales, about $505 million last year. And finally, our government program. We have a government sales team that goes where we have certain specific government contracts. We may -- that might be with the university. It might be with a local utility. It might be for a base. It could be a lot of different things. But obviously, there's a lot of different tentacles in government, and they need very specific things. We have a government sales team that helps us pursue and push and grow that market segment of business. And so they -- because they have unique needs, we have a small team, that's what they do. That's who they sell to, and that's about 4% of our sales today. But all those contracts, there's a lot of services that all of those contracts share. They share different resources, whether it's our industry specialists, like our safety team, our lean team, folks like that. It might be the Onsite development specialist you heard Casey talk about. It might be a product specialist. And thinking about what we do is we pour a lot of our expert type resources, it might be an engineer, to these contracts. But all these buckets, all these groups, they're all sharing it. But the other thing of all those, every set of those customers is served by a local branch or a local Onsite. It's a network that's putting in the work to make it happen on the ground. So I want to just take a second to kind of explain that now when you see our releases, you're going to see sales grew at XYZ. That's what that is. Hopefully, that makes sense and helps a little bit. I know a lot of times in Fastenal, we can throw a lot of acronyms and things and get people lost. So hopefully, that helps a little bit to explain what we are, what we do and who's doing what? That's really important, right? Understanding who does what is kind of organizationally a critical thing. So Casey mentioned, Jeff mentioned a little bit about resetting the business. And so when you think about this, I'm going to talk about regionalization and what that kind of means. So to set it up, so imagine you're sitting in Minnesota right now, Twin Cities, right, saint Paul. Well, you're sitting in with an individual that runs this region for Fastenal, and her name is Asia Major. So she's called what's called our regional sales manager. So what we do -- so Asia owns the prospects and the contracts and the opportunities of the corporate HQs within her geographic area. So for her, its like Minnesota and North Dakota, South Dakota, part of Wisconsin, part of Iowa. That's her area. But she has ownership. In the past, we didn't let Asia own all of that. We had other people, other owners coming in to do certain little elements of it, which became very inefficient and very confusing for the field sellers. Because all of a sudden, you had to chase so many different spectators, so many different goals to try to figure out who's driving this. Well, now you know if there's a corporate headquarters in this region, you just go to Asia. And Asia stays connected with [indiscernible]. Aaron is going to be giving you a tour if you're going to go to the tour of our branch. Aaron and his team are going to give you a tour of that. Aaron and Asia are connected at the hip. They work on people who makes sense to go to the team, who would thrive on her team. They work on customers together. They work on opportunities together. And so that relationship is such a critical component of us being aligned and being ultimately successful in selling through the contract the way that we should. It's also critically important for kind of what Casey talked about, when we have role specialization, we need to put the right people in the right role for their skill sets in the moment in time. So as their careers develop, the better and the tighter Asia and Aaron are connected means that we can give opportunities in the area to the right people. We can develop more people. And what that helps with is retention because they're working together on pathways, working together around, hey, who would thrive at this. Hey, we're working together on -- this person is really good. One of Asia's best sellers today is a girl named Emily. Emily,ran a branch for Aaron for many years. I didn't think Aaron would ever give her up. But because of that partnership, he did, and she runs a lot of critical accounts for our company today within Asia's region. I don't think that happens before mid-2023, but that's the kind of trust that those teams have built together. And so when we talk about rebuilding the culture, our purpose, flattening the structure -- what we mean by that is what we did is we really took titles and we shrunk and reduced them, and we put more sellers in front of customers. We're an ownership company. When I talked about why it came to Fastenal, it's about ownership. Ownership at an account level. Too many managers, not enough sellers, does that make sense? So flattening just simply -- what we did is we just put more people into those sales roles and had our best leaders manage more, lead more. That was a critical component. And finally, I'm going to get this to the next slide, but requalify our prospects. Now we bucket -- and one of the things that we're really proud of last year, and I believe Dan mentioned this maybe on an earnings call last year, he talked about our customer show. He talked about how it's sold out. This year, the same oversold, right? We're freaking our show people out because we're overselling this thing, right? So our trade show team does not love Bill and Bill and Casey. I got to put Casey in that mold too. I'm blaming Casey, too. He's got to come to the guillotine with me sometimes, right? So what we're -- I believe a big reason that we've seen so much success is mid-2023, really Q4 '23, we really spent a lot of time requalifying all of our prospects. And requalifying it meaning who should be a national account prospect? What should the parameters be? What should that look like? And then we went and vetted them. The beauty of having local teams is you can vet prospects, we can vet prospects better than anybody else on the planet, period. Why? Because we just don't see data on a spreadsheet. We can go take that data, we can go vet it better than anybody else. Because I have somebody in that market who can tell me, is that factory legit? It looks like it has the headcount, it looks like they make this stuff, it looks like they do this. Well, I can vet it faster than anybody. So we get that done in a quarter. And we broke it into a different sections. The contract sales section, you think about our corporate headquarters, that was one element of prospects. The second, in the map, you actually see, when you sign a corporate headquarters, they have a number of factories. We call them our child accounts or our plant-based prospects of our contracts. This map shows all the contracts we've signed and where the factories are. Factories that can do more than $20,000 a month. That's kind of what this map shows. We've put all kinds of maps for you from different prospects, right? But what you're seeing is a heat map and kind of where they are. And so what we can do now is I can say, hey, Casey, we just signed these contracts this year, we just signed these contracts this month. Here's where the factors are. So we know there are certain areas we have to invest more in a lean team. There are certain areas that Casey have to hire a lot more Onsite leaders. There's areas that we're going to have to make sure we have the right support in place because we got hotter in a certain area. When we look at things in clusters and groups, now we know where to invest because we can't invest equally. We're not going to put a big lean team in Wyoming, right? But I'm probably going to put a bigger one in North Carolina, if we're signing a lot of stuff, right? The key is you have to sign it to then go get it. Third is we have single location prospects, very exact similar process. That's where our CSC team is attacking every day. That's where our local team, when Casey talks about, he mentioned the Target 5, that's a lot of that, right? We went with our local teams and redid all that not too long ago. Government prospects. We have our government sales team, same thing. We bucketize that. We ensure the government team knows exactly who to go after. And where we don't have capacity with government sellers, we're going to go to our CSC leadership and say, Hey, you put these 3 universities in your CSC prospect list, yes, you bet. That's the value of working together, having the right culture being aligned. And finally, new commodity prospects. So we mentioned we have some of the best industry specialist teams on the planet without question. If you are a company and you buy fasteners, we have an incredible engineering department. There's a lot of reasons why, but one of it is we've made fasteners and components for many, many, many years. So we don't just distribute it, we make it. Not a lot of companies can say that. We're inherently simply better. Everybody can say that they have 200 to 300 people in Asia to qualify factories for us, make sure we're getting the right quality, making sure that we're working with ethical manufacturers, ones that share values with us, ones that follow the right regulations, laws and quality. So because of that, those new commodity prospects, things like whether you're in fasteners, you're in safety or if you have metalworking, we have incredible specialists to come help and support your business. And so our safety team or our metalworking team, they might be going to meet with the head of environmental health and safety to offer unique things that we can do. They might be going to meet with their head of who runs all their machine shops. It might be with their head of quality, head of engineering. And in a lot of cases to get the contract, we have to win those rooms. You can't win a big fastener account without winning the quality room, without winning the engineering room. They're not going to switch to you. So having those and knowing where those folks need to spend their time, much like Casey said, Focus40, that's a different version of it. It's the same thing. It's putting the right resources towards the right opportunities and protecting your time so that you can do that. So real quick, I put this up simply to show you -- you hear a lot of terms from Fastenal, right? You hear contract HQ, the site level. I'm just going to walk through, because Bill is going to hit on this as well. But when you look at this, you think about a headquarters. So you think about a plant and pick a company in the cities, right? And they have a headquarters, but they have a lot of plants. So our NA team owns the plant or the HQ. Boardroom Bill, as Casey said, I don't know if I like that or not because I equate board and Bill. I have a 10-year-old daughter and she just start saying board Bill, Bill on board. Take me to the trampoline park, right? So our NA team, our lean team, they'll go to that. Second, you have the plants that exist underneath them. They own plants. They have factories, right? Well, that's where we're sending our CSC sellers, our district managers, our market managers, might be our business sales specialists that Bill is going to talk about. That who's going and attack it. Third is we have commodities. Let's say we went and we won the safety business. Okay. You also have to spend in fasteners. You also have to spend in metalworking. We have teams to help our local teams win that when necessary. And finally, once we're in, there's a lot of parts, a lot of swim lane around the programs, a lot of stuff around the managed spend for print parts, different parts. And so once our teams are in, Casey and the Onsite development specialists think about them trying to win us parts. There's a lot of parts we can go fishing for every single day. When he talks about creating that sales culture at the local level, that's where the rubber hits road, right? With Aaron [indiscernible] in Oakdale, he taught me this rule back in the day. He said, every time you go into a plant, you should walk up with at least 2 opportunities. That's that part thing, that's what he's talking about. That's he's talking about. So a lean team across all of them. Remember, the first thing we talked about. The first thing we talked about today was we want to make a customer's business better. Who does that for us? We send in our lean consultants to go help us figure that out. They'll go into that plant, they'll analyze what they do, they'll analyze their process, they'll analyze their procedures. What they then do is recommend the right solution, and they'll create benchmarks that we can go back to and continue to improve that business. And it's also our report card. Mr. Customer, how are we doing. Now customer-centric alignment, you've heard a lot of the things. Dan is going to talk buckets. So I'm not going to talk to that. Casey talked fulfillment centers, CSCs, Target 5. But all of these things, lean team, sales development, contract management, industry specialists, integrated sales, technology, all pointing towards what our largest type customers need and want the most. So our leadership challenge has been to keep those aligned on the right opportunities, to keep those aligned so that those customers that we need, the customers that we covet, the customer we have a lot of success with that we create tools and we invest in things that continue to make them better. That's our focus. I forgot who mentioned growth. I think Jeff mentioned maybe contract growth. But when you look on the national side, it's our national or multisite contract that top thing, right side is overall contracts. So we really -- honest, we didn't sign enough contracts in 2020. There's obvious reasons for that, right?. We just travel and things. The world changed a little bit. But not in 2021, 2022 and 2023 weren't what they needed to be to put enough fire wood on the fire, so to speak. You know what I mean, when you go when you fish and you get prospects and you create opportunities, you do those things, you're collecting wood to put on the fire. And you're giving your local teams choices and opportunities, you don't want to be dependent upon one opportunity for all your growth. I want to give Casey and his teams 15 different options. And if 9 or 10 of them stick, that's great. But if you only give them one, then you have to concede. That's it. Good, better and different, married. And you're married to whatever that result is going to be. Now the importance of contract signings and prospecting is giving more opportunities to the team in the field to be able to go into that factory with a contract vehicle and grow their business. As you can see, we've gotten that growth into double digits year-over-year, and we have a lot of contracts. So we have over 2,000 multi-site contracts, over 1,000 regional contracts, and we still hold the major government contracts. So now what we have to continue to do is refine our contracts because they're not all 2,000. We won't keep every single one, right? There's factors that happen. Companies go out of business. They move. They change. Or maybe at this time, maybe we didn't do a great job of improving their business. We're showing them that we improved it, right? So we might turn a couple. That's why our signings are so important, so we continue to put more and more wood on that fire. So we continue to create more and more opportunities for our sellers. So we continue to create more and more revenue for the company. Because going back to the first piece, our #1 goal, and what we have to remember, if we're a growth driver, that local team, that district team, that regional team has to grow faster with us than without us. Signings are one of the ways we make that happen. Communication is one of the ways that happens. A great culture and staying connected like Asia and Aaron is the way that, that happens. So within our sales team, and you see there's a lot of elements, a lot of places that we sell. And just because it's labeled a multisite or a national account or a government account or a regional account or a single-site account, there are a lot of people that need to sell really well at a lot of levels to maximize that contract. So we have to be great through the contract. If we were just great at some of the headquarters or just great at the local level, if those don't -- if we don't sell really well throughout the whole org, we are going to struggle. And part of the reason they talked to change in the adjustment was we had to get more things happening at the headquarter level. And we have. And we have a lot more target-rich prospect list. And you know what, the customers are reacting well. And the one piece of data to show that we've got the prospecting right is our customer expo. The right customers, more want to come. The trade show teams wants to get me fired. Hopefully, Jeff protects me on that. But that shows those things are working. So those are the things we look for. So with that, I'm going to turn it over to my colleague, the other Bill. I don't think he likes me calling him the other Bill because he's pretty darn good. Bill Reichenbacher. Thanks, Bill. Appreciate your time, everybody.

Thanks, Bill. Appreciate it. Good morning, everybody. It's not lost me that I'm the last speaker of this group, so I'll try and keep it a little entertaining and keep everybody on their toes. I've had the privilege of working with Fastenal for the past 37 years. I know what you're all thinking, what the heck, how did they hire some guy when he was 5 years old. But it's been a joy. My Fastenal journey has been one of almost all of the field-based positions. So my entire journey has been in the field, all in customer-facing roles. I've been an assistant manager, opened the 38th store in the company, our first store in the Chicago market in 1987, was a general manager, was a district manager, was a regional vice president. 2017, Dan asked me to move over to the national account team and have been part of our contract sales program ever since then. And so I think that gives me a unique window into understanding why do we win? Why do we win at the branch store sales associate level. When that sales associate is in the bowels of a manufacturing facility, working with a maintenance manager that's working on a project and that maintenance manager needs product. Why do we win that product? Why do we win at the local level when a branch manager has a customer that's in the Top 5 prospects, their Focus 5 group and they want to get that customer convinced that we should be their primary supplier. Why do we win when a CSC is calling on a site, and that site wants to embed our people inside their facility in an Onsite location. And why do we win at the contract level, where we have a large potentially Fortune 1000 type customer that has multiple sites across their enterprise, and they want a program that is consistent across the organization. Well, it's that last piece, the contractization, that's what Holden has asked me to talk to you about sales processes. And so I'm going to take you through a journey in the next 20 minutes about what our sales process looks like and why we win at the contract level. It starts with a contract vehicle. Now you've heard us talk through the years about Onsites and vending and all the tools, but they all have to be bolted to customers. We can't bolt all of our tools on to this program. Procurement has evolved over the last several decades. 20, 30 years ago, almost all of the decisions in procurement were made at the site level. They were made -- MRO was independent. If a customer that had, say, 85 sites under your umbrella, it's operated independently. Their own procurement groups. But what's evolved in the last couple of decades is the aggregation of data. And so the data has allowed organizations to understand what their spend is across all of their platforms, and they're doing what they should be doing. They're looking to leverage that spend. And so all of a sudden, now we have just about every major organization, having a part of their procurement org focused on how do we aggregate the spend and drive that down? But they're still accountable to the site level. They're still accountable to make sure that those sites in each one of those communities, they get great programs. It's one thing to leverage spend and to drive it into the site level. But if you don't give them a great program, it's useless and it doesn't work in that area. And that is where Fastenal excels. That's where we're able to develop site-specific programs for each site, yet tie that to a contract vehicle. So how do we do that? And I'll walk you through the journey of our sales process and what that looks like. It first starts with prospect identification. What are we looking for in prospects? Who are the customers that we want strategic partners with? It doesn't make any sense for us to form a strategic partnership with a bank. They just don't use the products that we sell. Even if you're a really large financial institution, it doesn't make any sense. And although your revenue may hit a really big number, it doesn't make any sense in that area. And so where are we identifying these prospects? We have a team of sales development representatives, and their job is to help us identify where we should be playing. What are those fields that we should be working in. And so our research is focused on where we want to spend our time, where do we want to spend our energy. Our sales development representatives have an incredible lead-generating system. In fact, we have the best lead generating system in the industry, and that's our over 3,000 in-market locations. The amount of data we're able to pull from the branches out in the field and understand where we should be playing is incredible. There is rarely a situation where we have a high-value target prospect that we're chasing that somewhere in the world, we're not doing business with already today. But we might be doing business with only 2 or 3 sites, and that customer may have 50 sites, and that's what the contract vehicle allows us to do. As you get a corporate contract vehicle, we can take that and we can port that program that we're doing in 2 or 3 sites to all 50 sites and exponentially expand our revenue with that customer to drive that piece of it. And so our SDR has spent a ton of time focusing on where these prospects sit, and they try and identify who are the key decision-makers within the prospects at the corporate level. And they're very professional in their outreach. They do outreach to those prospects. And their goal is to gain a meeting with a key seller or key decision maker within a prospect that we seek. And then we send one of our professional sellers in to meet with that prospect and drive it. So the purpose of this discussion or for the purpose of this discussion, I'm going to walk you through a real-life example of where we identified a prospect, we put them through a sales cycle, we implemented a program and now that is a customer, a very successful customer that's in our account management process. But to set the stage, I want to give you some parameters around this customer. They're a major manufacturer that plays in the heavy equipment industry. So heavy equipment manufacturing, we know they use a ton of products that we sell, both on the OEM or direct material side and the MRO or indirect material side. So we know that there's a significant amount of revenue that can be gained by a partnership with this customer. In this case, this customer has 9 manufacturing locations, 7 here in the U.S., 1 in Canada and 1 in Mexico. So primarily North American based. They have about 6,700 employees, and their ability to -- they're about $2 billion in revenue. Now for confidentiality reasons, I can't give you the name of the customer, but for purposes, we're going to take a name out of Seinfeld, we're going to use them as Vandelay Industries, and we'll tell you the story of Vandelay Industries. So this is our SDR team. Our SDR team identified that, hey, Vandelay could be a high-value prospect with Fastenal. And they reached out to a couple of our branches that were already doing business with Vandelay and identified, hey, who should we be talking to at the corporate level with Vandelay Industries. They identified a handful of people, get outreach to those folks and connected with an individual in that organization that agreed to take a meeting with one of our professional sellers. And so they handed that meeting off, thus, our sales cycle begins. Now in our world, our product and our program isn't -- our products aren't overly complex. But our programs are very complex because they involve a high degree of parts, a high degree of SKUs and contracting for those numbers of SKUs and the sales process that we go through on those numbers of SKUs is often somewhat arduous. And so our sales cycle is long. When we put a prospect into what we call the opportunity stage until the time we close that prospect is one, meaning we've signed a contract, that process is typically 6 to 9 months. And so we must have our pipeline built really well so that we're constantly feeding prospects into this piece. And so we know now that we're on a 6- to 9-month journey with Vandelay Industries, and we're going to have to convince Vandelay that we're a great customer, a great provider that can make their business better. And so this is for sellers. This is Doug. And Doug actually leads the sales team that connects with Vandelay Industries, and that entire team gets involved with Vandelay and walks through our sales process. Their job is to negotiate, their job is to sell, their job is to be quarterback for Vandelay. They pull in all of our resources, whether it's a safety specialist that needs to meet with the HSE professionals, whether it's a lean specialist that needs to be in there. Doug and his team pull those in to convince Vandelay over the next 6 to 9 months that Fastenal is the best provider that's going to make their business better. But how does that sales process work? How are we any different? And why do we win in these contract situations? Well, the first thing we need to understand is the left-hand side of the screen. What's important to procurement? What's important to the people at Vandelay Industries that are made the decisions as to why they would bring Fastenal in as part of this group. We get some information from Hackett, who every year puts out a survey of procurement priorities. They survey thousands of chief procurement officers to understand what's important to procurement. And so as you can see, these aren't probably magical things. We understand procurement wants to drive down cost. They want to make sure they mitigate their risk. They want to combat inflation. They want to be strategic advisers within the business that they service and going to help transform the operating model within the business. But what's unique about this is that only, only driving down cost has been the consistent metric of priorities within procurement over the last 10 years. Other metrics have come and gone out of those top 5. In fact, pre-pandemic implying -- ensuring supply chain continuity didn't even make the top 10. Ever since then, it's been the top 5 for obvious reasons with the supply chain disruption. The other thing is, pre-pandemic, most procurement organizations were seen as fairly tactical within the businesses that they served. They weren't strategic. COVID and the pandemic gave them a seat at the table in terms of strategy within their organizations. And guess what? They want to keep that seat. And so from a sales process, we need to make sure that we're aligned and that we give them great tools to demonstrate that they're helping transform the operating model within their business and that they continue to add strategic value within the businesses that they serve. However, what we know is most procurement organizations even today operate more like the guy running on the flywheel on the right-hand side. They understand that, hey, their #1 priority is to drive cost down so they look at a market basket of products and they say, hey, I'm going to tension the market, and I'm going to figure out how to drive cost down. So they do what procurement organizations typically do. They go out for quote. They get proposals. They evaluate their proposals. They select the best price. And then they wonder why they never achieved the things that are on the procurement priority side of the screen. And in fact just 2 weeks ago, I met with a $17 billion manufacturer of heavy equipment products. And $17 billion manufacturer was operating exactly like what you see on the right-hand side of the screen. And so it's our job to illuminate to the customer where their total costs lie. We have to show them that there's a lot more below the surface when it comes to cost in their procurement chain. And that's what our sellers do. That's why it's a 6- to 9-month process. They spend time helping that customer understand that there's a whole world of costs below the surface that they don't realize today. We have to illuminate to that customer what that looks like, and we have to be able to show them that how they can transform their operating model through systems and programs that Fastenal can put in place because all of the tools we have in our toolbox help drive cost down with our customer. One of the things I'm really proud of being a part of Fastenal is, is that I can honestly tell you that every customer we engage in, we engage in a way that says how do we make this customer better. None of our sellers walk into a business today and walk in and go, hey, I want to sell them stuff. They're walking into the business saying, how do I make that customer better? Well, we make the customer better by illuminating to them where the costs are and then putting tools in place to make sure we drive down those costs. So we have a team of lean consultants. Many of you have heard about our lean consultants. They're specialists in -- they're not sales guys. They are realists. They're lean. They're looking to drive out waste within the organization. And so this is our team of lean consultants. They involved at Vandelay Industries, and they get out into the various sites of Vandelay and they work with those sites shoulder to shoulder to understand what are the true costs within their business. They walk through and they do what we call TCOAs or total cost of ownership assessments. What's a TCOA? Well, it's a DMAIC process mapping. And any of you that are familiar with lean, understand DMAIC process mapping: define, measure, analyze, improve and control. It's a systematic process. Lean Six Sigma principles that look to identify waste within the organization. And then we present solutions as to how to drive that waste. Now this is not specific to Vandelay, but this is a slide that shows you exactly where we find waste. This is a compilation of over 400 TCOAs that our teams have done that look to figure out within customers, how do we drive out their waste inside their business. How do we streamline their inventory? How do we ship more product on our trucks and drive down their freight costs? How do we consolidate their vendors and drive down their cost around managing vendors? How do we put products closer to where their employees use them so they don't have walk wait time to go get product. All of those wastes are real and impactful within these organizations. They're not tied to piece price. They're not tied to that flywheel that you saw earlier with that individual running where you're just chasing a price. They're tied to real transformative cost savings within the business. And we do so, and we measure and analyze these in a way that after we implement, we can document and continue to show what savings we're driving out. And many of the costs are labor reducing costs. And we know labor is the biggest expense these manufacturers face. And so if we can displace labor and put this labor to doing what the customer's core competencies are, that customer wins. So if we look at Vandelay, this is the exact data we pulled out of Vandelay industries. This is out of 4 sites. So they have 9 manufacturing sites. We went and did TCOAs at 4 of their 9 manufacturing sites. And you can see a 27% cost savings that we were able to produce for Vandelay. Now the current TCO column, that's their current state. That's what they were spending to run their program. And the future or proposed TCO, that's the savings we drove. And the major savings within Vandelay Industry was displaced labor. So they were managing all their cribs and they had a whole bunch of people. We put our people, embedded our people inside their facilities, and we manage their cribs for them to displace labor and vending consumption reduction. Because we put a significant amount of vending units into their facilities, and they had no industrial vending happening within their facilities. But it all started with first and foremost, having a contract vehicle that we could bolt Fastenal solutions such as Onsite or vending to. If we look at that contract vehicle, what does a contract do for the customer? And what does it do for Fastenal? And why are we successful at winning those contract vehicles? First of all, at the corporate level, it allows the customer to take things like direct materials and indirect materials and tie them to one contract within our organization. It also allows them to put an e-business model in play. We wouldn't do things like a punch-out catalog at a single site that has a small amount of spend. But if you're a customer that has 50 sites, now that small site can have an e-business platform just like any of their big sites and manage that piece. So there's a huge corporate advantage to have that contract vehicle in place. It allows them to get great data analytics and you're going to hear from our team later today on what those data analytics look like and what that tool is. It gives them leverage to leverage their business terms. And so now they're not acting as individual sites. It's all tied together as to one contract vehicle. It allows them to have consistent pricing terms across the organization. And it gives them the ability to limit and categorize and practice great category management with the products and scope. Let me tell you, what we're doing there and any of the major national competitors that we face, they can all do that stuff on the company level. The difference is, how do you customize it site by site? How do you make sure that, that small site in a rural location is getting the service model that they need compared to that large site with hundreds of employees that needs a different service model. And that's where Fastenal excels. We excel because we can put our FMIT solutions into programs as needed into each site. We excel because we can embed Onsites where needed and some locations don't need Onsites. We excel because we can put site-specific products and stock those products in that market to fulfill that customer's needs, mitigating their supply chain risk. We can pull our specialist in as needed to each of the locations, and we can develop custom fulfillment services for each of those sites as dictated by the site's needs. And on top of it, we can do it in 25 different countries. Because one of the great things that Dan and Jeff and our leadership have built within the organization is I can look at customer in the eye and I can tell them, you really like the vending program you have here in Minneapolis. Oh, and you've got a plant in Poland, we can do that vending program for you in Poland. You like the fact that we embedded our people in your factory in Iowa. How about we embed our people in Brazil as well. We can take that to 25 different countries, and we can take our entire toolbox and port those into any of those countries. There is not an industrial distributor competitor in the world that can do that. Nobody has the toolbox we have or the geographic coverage that we have to be able to grow that business and sell our contract vehicles. And so we get through the sales cycle, we get through that process, and now we have to implement the business. This is by far the biggest risk we have to make sure we provide no supply chain disruption, taking that customer from their current state to what was our proposed Fastenal state. And so we have to have an incredible implementation team. These are the people that really make our market share gains possible because they make sure we do what we promise and we get these sites implemented correctly. They flow down from our lean teams. So anything our lean teams promised or looked at or proposed in the TCOA, these implementation specialists simply are able to be aligned with what we're doing in lean and implement the programs and turn those on. And so if we look at Vandelay Industries, this is what we implemented. Their largest site is in Indiana. In Indiana, we have 93 point-of-use stocking locations at one manufacturing facility, and they have an Onsite. We embed 7 people going to work inside Vandelay Industries in Indiana every single day. So they stop those 93 point-of-use locations and they manage the Onsite crib. We invested about $1.5 million into our technology, our vending programs, into our crib systems to get this program up and started. But move this over to Pennsylvania, where Vandelay has another site. Well, on that site, it was a smaller site. They only had, in this case, 8 point-of-use stocking locations, and we're managing it from a local branch. But we've had Vandelay Industries now for about 18 months, and over that 18-month period, our business ramped up so much in Pennsylvania that they've now invited us to come Onsite and work directly with them and embed our people at that location Onsite in Pennsylvania. Jump over to Wisconsin and Vandelay has got 3 manufacturing facilities, all within a really close proximity of each other. So in that case, Fastenal has a customer-only location where we have a team of people dedicated to Vandelay. But that serves all 3 sites, and they know each one of those 3 sites, and that's a dedicated team taking care of them and stocking that inventory for. And then if you look at Vandelay's facility in Kentucky, well, that's a smaller site. We will probably never go Onsite. But we have a branch within 5 miles of Vandelay that meets their fulfillment service models and is set up to service on the stocking program within that location. So these are 6 Vandelay locations that we are embedded in today. And now we're in the account management phase. By the way, in 2025, Vandelay will do over $20 million in revenue with Fastenal. So it's a significant partner with us. It's a great customer that we've taken through this process. And now we've got a team of people, and this is one of our BSSs that manages the Vandelay account. How many sites did we have at Vandelay to start? 9. Today, we're only doing business with 6 of them. We're not in Canada. We're not in Mexico. We've got one in U.S. that we still need to make sure that we engage with and continue to work with. Now Vandelay set up their system, but they allow the sites the final decision of who their supply partner is. But they heavily influenced through the contract. Hey, we want Fastenal to be a part of it because we're a corporate contract holder. So our BSS is a salesperson. They're not simply there to do administrative account management tasks. They're there to grow the business. Because the other thing about Vandelay is that we only have today the MRO side of their business. Our business would more than double with Vandelay Industries if we pick up their direct materials, the OEM fastener side of the business, of which we're involved in an RFP with them right now as we speak. And so the opportunity to expand that business is significant, and that's what our BSSs do. They work on strategic business reviews. They make sure we're managing the business to the contract. They take care of the price file management. They take care of all the changes that have to occur within that business. and they continue to look to expand and grow our relationship. And because we have phenomenal account managers that we retain the majority of our contracts and continue to have great engagement and great growth with our existing business. Because the way we grow our key accounts program is really simple. We expand the current accounts we have. There is not a single customer -- Draz mentioned, we have well over 2,000 national account customers. I can tell you today, there is not a single national account customer we sell everything possible to. And so our ability to expand that relationship is huge, and then our ability to take on more key accounts is critical for our business. And finally, we have our teams in the field, and this is where the Casey and Draz' worlds collide. It is our teams in the field, the men and women, whether it's an Onsite team, whether it's a branch site team, the men and women that are touching our customers that are working with our customers every day, executing the things we put in that contract, they are incredible. And they're why we win the business every single day because for us to put those people in front of the customer, we know we're going to have success with that contract vehicle. And so when we tie it all together, we've got a high-touch model, takes care of the last mile of supplies with customers. We can pull in all of our industry-leading solutions, and we bolt those to a contract vehicle. And that's why we continue to win in the industry. Thank you.

So we're going kick into question-and-answer period. And what we're going to do is Taylor and Dray have microphones, and so if you can wait to get mic into the hand. But the one thing, since Jeff and I actually bought the group 5 extra minutes of Q&A for you, I want to make sure you got a sense of the range of capabilities that we deploy. And the reason we want to talk about this is because I've had a conversation with a lot of you about Onsites. Why don't you talk about Onsites anymore? Onsites are key to growth, Onsites are key to growth. The point we're trying to make is Onsites are an incredibly valuable tool that contribute to our ability to grow. Hopefully, what you got here, though, is the range of capabilities that we can bring to bear, which includes Onsites, but is not exclusive of Onsites. We talked about, obviously, the branches. Casey talked about the branches. We talked about, obviously, FMI. But you heard Bill talk about our ability to source directly. That's something that none of our competitors have that gives us a cost advantage. That is in our toolbox. We didn't tell much about exclusive brands, but that's in our toolbox. It's the range of toolbox. But also the volume and depth of resources that we deploy to the customers to make sure that we are executing or deploying the tools in that toolbox effectively in a way that, as Bill indicated, none of our competitors can do. And then when you take that and then you are selling those capabilities with a level of alignment that, to be quite frank, was perhaps not quite where it should have been 2, 3 years ago, that's where you start getting the kind of results that I think that we've begun to show and are going to continue to show. Now for those in the room that are numbers people, and I realize that's everybody in the room. This is not a numbers heavy presentation. But a couple of things you saw there is, when Casey talked about the difference between East and West, we have left some money on the table. If you do the math, because you will, if the West had grown at the same rate as the East over the last 5 years, we have about $230 million more in revenue today and about $45 million more in profits. We're going to get those 2 things aligned in the near term. When you look at the contracts, that's not contracts we left on the table, although we weren't growing contracts as we needed to, but the contract growth that you saw, that's building revenue into the business. So again, we've been growing the last few years with the contribution of market share gains, that as many of you have pointed out, not at the level of history. Our belief is what we're showing you here is the ability to sort of return back to at least that historic level of growth through market share gains. And so hopefully, that's what you pull out of that.

So what I'll do is I'll just -- to people randomly in the audience who raise their hand for questions, please wait for the mic and then we'll just ask you gentlemen to answer whatever is appropriate. Dave Manthey, up here front.

First off, I appreciate the presentation. I know there's a lot of work that goes into it. So it is very informative. My question relative to Focus40, Casey, I think you talked mostly about it, but I'll open it to the Bills as well. There's these 2 poles. You've got the sales growth and then you've got pretax, the sort of the 2 components of that. But when you're talking about the KPIs, Casey, you also included in there a return on capital kind of element. And I understand that the goal here is on those 3 poles to maximize the surface area of that triangle. But just to think philosophically about what you're trying to drive as an organization. If you think about those 3 variables, if you had to keep 2 of them constant and raise one by 10% and which one of those would you think is the priority of Fastenal today?

Whichever one Dan told us to raise faster. No, I mean, obviously, we want to get a pretax growth. I mean that leverage is very, very important. But what we found is as we specialize roles and we specialize our network and we tailor our inventory to our larger customers, we can drive the assets as well. So I mean the things kind of work together. And if we're continuing to drive planned spend through key accounts, we're going to get the return on assets that we want to see. And the pretax, Dan, go ahead. Okay. But the pretax, because you're leveraging your largest expenses, you should be able to get leverage on the pretax. And that's what our DMs are paid to do. They really need to get all 3 to drive their pay plans. So it's very aligned with those 3 elements that you spoke of. I mean, Dan and I, the first thing that we did, when we came in at about the same time, was revamped the RVP and the district manager pay plans to reflect those elements where you really have to get all 3 to maximize the pay. So they're working on all 3, I can assure you. Dan, you had something you want to add.

Dave, say the 3 again. Say the 3 again. I didn't catch the first one, but I have an idea of what it is.

Sales growth, pretax profit, return on capital, understanding there's overlap between those, and I'm asking sales guys the question, but...

Watch if I -- somebody watch as I answer this because Holden is going to squirm. It's the first one, every day of the week. Because I know if we do the first one, we know how to make a second and third follow. And sometimes we don't make it follow perfectly. And that's where Holden has been a really strong partner to the business in the time he's been here because our return on capital has improved. Our cash flow has improved, but which one matters, you can't save yourself to prosperity. You have to grow the dam business.

Tommy Moll from Stephens. My question is to go back to what's been referenced a number of times today, alignment. I think we've used the word reset a handful of times. So what was the catalyst internally for some of this discussion? And if you were not aligned previously, what was that unifying strategy? Or if now we're zagging, how are we zigging previously? What changed?

I mean, I'll speak for myself. I think COVID had a lot to do with it. We kind of lost a lot of our focus. We started to separate out. I mean if you think about we were talking earlier about teams versus in-person, a lot of things moved to teams. And during COVID, a lot of the groups, the communication wasn't there. And we started to lose a lot of the communication internally. I shouldn't say a lot, but we started to lose the focus. And I mean, it started -- you really started to see it in our numbers as we came into '22 and '23, things weren't working. And a lot of the stuff that had happened during that time of the lack of communication, I'd call it, I think started to flow through. So it was really getting back to where we were before COVID, if you want to call it that, just to get realigned back in. But I really -- I mean you guys might have a different opinion, but I think COVID had a lot to do with it internally.

My question is just on the contracts themselves. So what is in the contract and how has that evolved? And then you mentioned in one of the slides that you need to maximize the profitability of the contracts. Can you talk about how you do that?

Certainly. And the things in contracts are fairly -- I would just start with basic business terms. Things are in contract like what -- how fast will you pay? What are your payment terms? What's the inventory commitment that you're going to make? What's the liability that we're going to limit each other to? How are we going to share risk, that could be risk of inventory, warranty, several things like that. Those are usually the things that we spend the most time on. How often you're going to change price and why you're going to change price? What the driver of price change is? Because we know in the market, prices change, and so it's figuring out what vehicle are you going to use together that both of you trust, that can dictate this price to go up or down based on a market condition. And we handle it differently, whether it's an indirect item or an MRO type item or if it's an OEM type item. So those are the things that we've put into a contract so that when we have to hold each other accountable that we have that guide, especially when you're thinking about an organization where they have 5, 10, 15, 25 sites, we know every site they're in that 45. We know this is how much inventory they can buy locally and be covered. We know what's expected, when we can increase price and what mechanisms are going to happen. So there's a lot of efficiency that happens from that. And so once -- when you think about growing the sales and the -- I kind of go to that second piece of your question, the more we can -- once we've set an infrastructure in place at a customer, you sign an account specialist or an Onsite, you put in a technology or a system, as you add product, you really start to leverage through. And so a key to leveraging an account better or growing it, you're also -- you don't have to add a second account specialist maybe or you have a part-time employee helping. So because of like the footprint you have and the structure you've created, as you add products or parts, those dollars are a lot more valuable than those early dollars. Does that make sense?

Yes, I think it does.

So when you think about the growth of those kind of -- it's so important at the site level because you can grow the profitability of the site by selling more or getting more efficient in terms of how you do it. Because sometimes you'll go through a process and you'll learn a lot. We might like set up a binstock and we're there every day twice a day. We eventually will dial in, and you probably hear Jeff talk about this later, the min-max items, right, the numbers, using the data to understand how many of what products they need and where they need it in the plant. In many cases, a company doesn't have that in place before we put it in place. Well, now after a year or 2 years, we've captured a lot of data. Well, now we can adjust their inventory levels. So now maybe instead of having to go there once, twice, 3 times a day, we're having to make emergency runs to keep them full. Now maybe I'm going 3 times a week to do those bin fills. Well, now my labor got more efficient too. So we're always looking for ways to improve our customer, but also improve how we serve it by using data and information based on what we now know because we've captured it to run our labor at the local level more efficiently. So grow the account, create a productive environment, dial in your min-maxes, dial in your data, make adjustments, figure out the right service model and you can do better over time with both your labor and your profitability or your margin dollars you're adding to the business. Hopefully, that helps a little bit.

Sabrina Abrams, BofA. I noticed on Slide 25, there's under the government -- sorry, it's the end result customer-centric alignment slide. But there's no under government program that that's the biggest prospect in the U.S. and beyond. And just understanding, because typically, you guys -- 75% of sales are from manufacturing industries. I guess how recently did you identify government as a big growth driver? And what makes you excited about this segment of the market? Is it current levels of penetration? Just any color there.

A little bit. I think Dan wants it. We're going to give that to Dan. The boss wants that one.

Bill, you answer it first, and I'll chime in.

You go ahead, borther.

One of the speakers coming later this morning is Donnalee Papenfuss. I believe Donnalee just hit 25 years with Fastenal. And so in that '99, 2000 time frame -- I think it was '99, but if I'm wrong, it's 2,000. But in that time frame, we hired Donnalee to be involved in our government because we saw that as an opportunity. Historically, our sales with the government was very small and it was probably because we were selling some bolts to the highway department that they would use on their plows. I mean very small business, especially in Minnesota, a few more plows than Casey in Kentucky and Tennessee. But we saw it. And for quite a few years, our largest driver in that or a big piece of that, we had a federal GSA contract. What we learned after 5 years of holding the federal GSA contract and being contract award winner of the year for, I think, 3 of those 5 years, that they like to change the rules, and we stepped away from that GSA contract around 2007, 2008 time frame, and I've never allowed the organization to go back. It's all of our business is state and local. We find that we're a better partner there. It's a better relationship and they value what we do more. But we really identified it about 25 years ago, but it took a big step back in the late '07, '08 time frame. But we see it as a great business. One thing that really grew during COVID is coming into COVID, I think we had 4 or 5 Onsites that were government centered. Coming out of COVID, that number had grown to about 25. And today, we have close to 50 locations in Fastenal that's either an Onsite or a government dedicated code. Maybe it's in the 40s. But what's special there is when you think of what we do in Onsite, University of Houston is an Onsite customer of ours. We're physically on their campus, and we're providing Onsite services like we would to a manufacturing facility. It's a lot more facilities maintenance. So it's a little more work for us because we're not -- we have to throw more energy to figure that out, but we're slowly figuring it out . But going through COVID, a lot of those partners realize we've never partnered with Fastenal. We don't know who the heck they are. But they figured out how to get stuff when we need to get stuff because we want to operate for our students and for our employees. And the only way you can do that if you need mass, you need mass. If you need stuff, Fastenal has a way of finding it. One of the reasons I grabbed the mic is I also wanted to address -- 2 questions ago, it was the word reset. And when did we realize it? In life, you have decisions you're proud of. You have decisions that, "Man, I wish I had a time machine and go back and redo." The first decision -- so in October of 2015, on a Monday afternoon at about 4:00, I discovered I was the next President and CEO of Fastenal. And it was kind of a weird year for us because we had gone through a little bit of turmoil. And one of the Board members suggested to me, "Hey, Dan, you should consider getting a coach because everybody else before you has had kind of a warm-up period to step into this. Tomorrow morning, you have an earnings call and we had an awful quarter. We went negative in the last 6 months of 2015." The first decision I made as President and CEO was I went and got a coach. What I learned from that coach, opened my aperture to 2 people in Fastenal. One is Reyne Wisecup, the other one is Nick Lundquist. Before that, I didn't open myself up to learning for them the way I should have. I saw the wisdom in doing that. Those 2 people became early on confidants, confidants for me, and I will thank them to my dying day what they did for me over the last decade. The second decision, very unexpectedly, I had to replace an EVP. I called Casey Miller. I said, Casey, I love what you do in your business. I love what you're about and how you -- you cherish our past, you learned from our past, but you don't cling to it. You look to the future and how we can grow and you grow really successfully. Here's the catch, I need you to move to Winona, Minnesota. And I know you're from -- I know you like Kentucky and Tennessee, and that's all cool, but you need to move here and you need to be here for at least 5 years. After that, if you're running the East and you want to live in Nashville, I don't care. But you need to come here. And Casey said, really? I said, yes. You'll like it. There's great hunting. And so Casey did that. Third decision, if I go back to 2015, we didn't advertise this fact. Our IT was a mess. We had underinvested in it for years. We struggle -- 5 times a year, our distribution software would shut down for 20 hours, and we had chaos in the DCs. And we had to figure out how to stabilize that. We had a hard time getting PCI compliance so we could accept credit cards. I mean this is 101 stuff. I went to John Soderberg, who his connection of technology was he had a cell phone. He'd grown up in the organization, General Manager, branch manager, regional VP, led our government business, he led our vending business. I said, "John, how do you like to lead IT?" John looked at me and said, "Are you crazy?" I said, "John, you're a leader. We have great people. They need a leader." Later that year, hired Holden, the CFO. I think that was a great decision for Fastenal. A year later, as Bill mentioned, I called up Bill and I said, hey, I know you love running the region in the Midwest. How would you like to be in national accounts? And by the way, can you give me an answer in the next 15 minutes. Fortunately, for Fastenal, Bill said, yes, this is Bill R, not Bill Draz. Two years later, I went to Bill Draz, and I said, Bill, you've done a great job with national account. Everybody trusts you and your collaborative, they love you. For your career, I'd like you to move out of national accounts and lead our business in the Western U.S. because I want you to get more experience running a P&L. Did I ever screw up this company by asking Bill to do that? And it wasn't because Bill didn't do a good job with the West. He was great in national accounts. And I took somebody out of role they're great at and asked them to do something else. And in 2023, I reached out to Jeff. Jeff makes great decisions. Jeff is great at evaluating talent and his leaders are stellar in his international business. I went to Jeff and I said, "Jeff, how do you like to -- we need to get sales under one umbrella. How would like to be Chief Sales Officer? And the first thing you need to do is you got to address national accounts." During COVID, we became very insular and maybe a bit arrogant. And the relationship between our national accounts team and our local teams had gotten adversarial as opposed to collaborative. We've got a fix set. We're not signing enough accounts, and we are screwing this thing up. And I said, but you can do whatever you want. That's my suggestion, but I'll support whatever decision you make. We made some changes in '23 and Bill talked about the reset. I'm excited about what we're doing right now with contract signings. I'm excited for the relationship that exists between our local teams and our contract sellers. It's not a -- oh, the local team is just the service arm of the contract sellers, the local team and the contract sellers are partners in a supply chain business. That's what makes us great. Now I'm going to get off my soapbox. Next question, please.

It's Ken Newman with KeyBanc. I wanted to go back -- maybe this is a better question for one of the later sections. But Dan, obviously, in your answer to the question on the focus for the Rule of 40 target, you emphasized growth. Bill, I think you also talked about -- and all the sales guys talked about efficiencies as well. Typically, when we think about Fastenal, we think about you guys needing, call it, high single to low double-digit growth to really drive good margin expansion. As you think about shifting the strategy now towards this Focus40 and realigning the customer base, what's the opportunity to lower that threshold if it's high single digits, can it be a mid-single-digit grower and you still kind of get that same type of operating leverage?

Question fundamentally is have we lowered the point at which leverage [indiscernible]. Guidance I've always given to investors is mid-single-digit growth, we're going to defend the margin. Low single-digit growth, we're going to lose the margin. Above mid-single-digit growth [indiscernible] expanding. And I think the question is [indiscernible] what we're talking about today changed that [indiscernible].

I would say one thing first is the goal for all of Fastenal, for all of our plan that we've been working on for the last year, the goal for everyone that works here is we're a double-digit sales growth company, period. Everyone in the company believes that we just needed the right pathway to get there. And a lot of things happened. We got off that pathway. Now I mean, in my mind right now, Casey and Bill or Bills, you may agree or disagree, but I believe that we're on the right pathway for double-digit growth and anything below that, me and Holden thought about this for a long time and some other people. If we're at 5% growth, can we get. Yes, we can. But that's -- internally, the message across the teams is we are a double-digit growth sales company. We just needed the right plan to get back to it. I don't know if you want to add anything to that?

No.

It won't matter if we can grow double digits.

Paul Ryan at Raymond James. Casey, you mentioned that with going after the key accounts, you would need bigger teams to attack those accounts. Can you talk about the labor cost dynamic in terms of if Fastenal requires bigger teams to go after that, but you're also seeing branch consolidation, maybe get some efficiencies in the CFC model. Just talk about the labor cost dynamic in sort of a normal growth environment?

There's no question that larger accounts help us drive our FTE, larger teams help us drive our FTE. So we've seen really nice expansion in our full-time equivalency, which has been really exciting since 2019 because that number hadn't grown since I was skinny. And then all of a sudden, we start to do Focus40 and we start to get some consolidation going and we're starting to see our FTE grow significantly. So I think I think what is it holding around 30% that we've grown since 2019, our FTE, is that about right? Yes, I think that's about right in the branch level, but it's grown significantly. So if we can continue to land large accounts, we'll expand our FTE. Those larger teams allow us to specialize the labor, which, again, allows us to grow those accounts faster to expand FTE. Bill mentioned it. If we pick up a commodity at a $50,000 a month customer, we don't oftentimes have to add labor, particularly if we're using technology. So if we've got the -- let's just say we have the safety today and we pick up the cutting tools. We're just -- we have fuller trucks when we go to that customer. And the same people can weigh the cutting tools that are put in the way, because vending allows us to know exactly what to bring and they don't take up a lot of space. It's not heavy. It's fairly easy for us to leverage that labor.

One thing I want to add to make sure that the perspective is understood, and then we'll break. When we talk about larger teams, what the field has done in terms of consolidating the branch network in terms of specializing roles, that has allowed us to put larger teams on key accounts. We have grown our headcount, and we'll continue to grow our headcount. But the critical aspect of it is, are becoming more efficient with that headcount. And so I don't want you to come away from this saying, while growth is going to require a lot more people. If you look at Casey's East-West analysis that he has in his section, you'll see something there called key ratio. Key ratio is our gross profit divided by our labor dollars. It's how we measure labor productivity. What you'll see is in the branches, from 2019 to 2024, we have grown our labor productivity by about 2% per year. So we have bigger teams, but we're able to have bigger teams because we've freed up resources in our business other ways and we become more labor productive. I just want to make sure that everyone has that understanding. They've been working really hard to make sure they can balance the need of driving sales with the need to be productive. And so just to make sure that we have the perspective there. For that time, we have a 15-minute break built in. So go take care of what your coffee this morning has brought, and we will meet back here in 15 minutes. [Break]

All right. We're going to get started again. This next section, we're going to begin talking a little bit less about the field specifically and the selling process and talking more about what we sell. One of the things that we want to make sure that we highlight here is the value. You heard about technology in several of the conversations and discussions earlier this morning. We want to make sure we talk about the technology and how that fits into the toolbox and how we sell it. So to start off this section of it, I'm going to turn it over to Jeff Hicks.

All right. Good morning. Thank you, Holden. So I'm Jeff Hicks, I've been with Fastenal Company. In June, it will be 31 years for me. I spent 23 years out in the field. So the first part of my career was roaming around Illinois and Indiana. I spent the majority of that time as a district sales manager out of the South Bend, Indiana area and the Indianapolis area. So about 18 years, almost 19 years as a district sales manager. I made the move to Winona in 2017. I spent a year with our government department. So I got an opportunity to understand and learn about that government business. And then in 2018, made the transition over to our FMI technology. So since 2018, I had the opportunity to work with our F&I technology team and seeing some wonderful growth come out of that group. It's a fantastic innovation. Currently, I'm a senior Vice President of Solutions. So one of the things we did was to look at how do we rope all of our customer-facing technology and make sure that, that business road map is aligned as well, makre sure that we're all working together and creating synergy off of each other. So from a Solutions perspective, you could think about the various web interface activities that we have out there, whether it be the web or EDI type transactions out there. Obviously, you have your FMI technology component, the various types of hardware-software combinations that we drop into our customers for Fastenal managed inventory. And the last one, which I'll touch on this afternoon, is our inventory management software program, how we have that opportunity to dive into various types of supply chain services with our customer base as well. So with our time today, what I'd like to do is I'd like to share with you how Fastenal has been evolving our technology and the supply chain. The breadth of what we work with has grown, and hopefully, you'll see that. Also, we'll touch on that human element. Technology does not work as much as we might like it to. There's people behind the scenes. So we'll talk about the importance of those. And lastly, we'll talk about the role that data plays in this whole equation. So at Fastenal, our commitment to growth is driven by our dedication to customer service. Over the last 15 years, we've evolved from an organization where people are just like, hey, there's those vending machines. Fastenal is the leader in industrial technology when it comes to vending machines. But when you think about it, this is where industry meets innovation, it's been a lot more than that. We've been innovating more than just vending machines throughout our business. Fastenal has been at the forefront of deploying the Internet of Things. So think about the hardware and the software combinations that exist out there in our world, and how we utilize those combinations as tools to collect valuable data. And that valuable data, it enhances our customer service and it enhances our operational efficiencies as an organization. And this has allowed us to expand from what people see as an industrial vending company to an organization that -- at the end of the day, we're a comprehensive supply chain technology provider. So let's talk about that time line. So our journey began back in 2008. And since that time frame, we've kind of made about 3 major transitions. In that 2008 time frame, we introduced industrial vending in the world of Fastenal. And it began with a simple FAST 5000, that coil machine and a couple of lockers. And as we went through this process from 2008 to 2013, '14, all the way up into '15, it was about learning. It was about learning what these devices do in the marketplace, how we could utilize the various technology, how it improves supply chain processes, how our customers are going to interact with those devices, we learned that. So when you think about what happened in that time frame with us, it was about education. And what you saw was you saw an evolvement around how we interacted with machinery, how we developed and expanded that. Gosh, we need to get these products, they don't fit in there, okay, well, we need different size lockers. We need different types of configurations. We need to transition to sensory devices. Customers don't want single point of access on every single item. How do you give them grab and go. So what you saw in that time frame was an evolution of us learning with our customers of what does that interaction with hardware look like. You fast forward to 2015 and you look in that time frame, and we recognize the impact that data was having on our business. We began to understand that, that story was a lot more than just about the device, and it was a lot more than just about the customer service, that what the customer was craving from us was information. That's what they really loved about the program was the rich amount of information and the stories that we could tell them. And so at that time frame, Fastenal began to understand that we need to get our arms around this data. We need to be the one responsible for managing it. We need to be the ones responsible for protecting it. So we made that transition and we acquired the hosting capabilities from an Apex. We understood the importance that data was going to play in our relationship long term. And we made sure that we brought that in-house so that we would have those capabilities and we could address that ourselves. At this point also we started to understand that we have to find a way to take those efforts, to take that data and story that we can tell with vending, and we have to tell it everywhere else. We're not a vending company. Fastenal managed inventory had a lot other components associated with it as well. So how do you tell the same data story on the rest of the business? And so we started to address the fact that what was the secret sauce around the vending program was the data was the result of a digital planogram. We organized our stuff and we kept track of it electronically. That's basically what we were doing. And that gave us the ability to tell a data story. So we said, how do we do that with everything else? So we did that. We worked on that particular road map. And when you move into that 2018 to kind of 2021, you'll start to see an acceleration to what we're doing. It's not just about vending anymore. When you look at that 2018 to '21, we accelerated. We developed Fast stock. So we addressed an application that we could put in the hands of our employees. And what was different -- I mean, Jeff, that's a barcode scanner, those have existed probably forever, decades. Yes, but we put the digital planogram behind it, something nobody else was doing in our industry. We took what we learned in vending and we applied it to an industry old technology of scanning. And all of a sudden, we got visibility to tons of data that we never had, had access to before and our ability to work and continue to expand that story. We took a product like FASTBin and we introduced that product. So we took technology. RFID, we took infrared. And we said, okay, vending doesn't work for everything. When you think about things like pipe fittings and valves, you think about fasteners and you think about some of these other products, the supply chain activities around them are not friendly to vending. It's going to be very difficult for us to expand vending into some of these categories. But we still have to collect the data, and we don't want everything to have to require that human element of a person visiting a site to take down the information. So we expanded. We used that RFID and IR to give us the benefits that we saw from vending where we could remotely look at an inventory state. So now I got planogram and I got the ability to remotely look at the supply chain activities without having to be on site. So efficiencies start to build now in terms of what that operating model is around those individual products. Most recently, it's been about how do we just continue to fill in the gaps, okay? The foundation is strong. We cover a broad base of what we need to do from a supply chain activity standpoint. How do we fill in a little bit of gap. So from a FASTScan standpoint, we have thousands of Fastenal employees that run around with a handheld application that allows them to take an order. How do you give that capabilities to a customer so that they can do that on our behalf. FASTScan does that. How do you address click? You've all got a button. I get it. It's not fancy. It's a button with a light. That's it, okay? But you know what that does, that button communicates to Fastenal without having to go on site where the customer wants to replace a pallet of product. It doesn't have to make a phone call. I don't need a fax. I don't have to get in the vehicle and drive out. The customer can push a button and they can tell me that they want more. They can push the button and they can see, did somebody already tell Fastenal I needed product. So there's color coding indicated on that button so that everybody has good lines of communication of where we at on replenishing an item that may or may not need to be replenished at that individual time frame. You look at a product like FASTBin Secure and Fast Scale, those are products or FASTBin Scale. Those are products that are going to come out this year in 2025. So when you think about FASTBin Scale, it's just another addition to the infrared and the RFID and the click. It's just another tool in that tool bag to go, but my customer wants something different that one of the other pieces of technology doesn't do. Most of FASTBin will tell us the inventory stay. It helps us understand volume. When a human being goes out to take an order, they don't pull all the fasteners out of a bin and count to 113 to go, oh, we're less than 200, I should place an order. They eyeball it and they go, yes, it looks like it's under 200. I better order 200 more, right? That's what that technology is doing for us. It's giving us an estimated inventory state. And based upon that estimated inventory state, we're able to make educated decisions on how to proceed. Sometimes people really do want to count. Our customers on a production line have inventory items. They have to flush a bill of material at the end of a week or end of a day or end of a month or end of a quarter. That gives them the ability to sit in front of a computer and see what the inventory level are the critical items on their production line that we manage for them. And so they can do their inventory states without having to get up and walk around. FASTVend Secure fills a gap for us in the vending mode. How do we continue to expand and grow our metalworking platform. Well, the Carousel has been around a long time, Fastenal doesn't have one. So we probably need to plug that gap. We need to make sure that for those customers that like the functionality of the device that we give them those capabilities because there's a lot of people in the metalworking industry that that's kind of their -- that's their thing. They like that. They appreciate how it works. They want that functionality. So how do we make sure that we give them those capabilities. As you move through this time frame, I think an important thing to understand is that what we've learned from our industrial vending and how we've innovated, there's various lessons that we've learned throughout that time frame, and it's all improved our operating margin. In that 2016, 2017 time frame, our operating margins with this program, when it was strictly just vending, was kind of hanging out in those low teens. And so we were still investing heavily in this, growing, learning new products coming out. So there was a considerable amount of expense coming into the program, but it's starting to mature. As it started to mature and as we learn things, we did things like we broadened out that technology line. As we started to spread that technology out and be able to address more things and support more revenue with that technology, we began to leverage on our operating margin. We had the acquisition of Apex. So when we looked at the opportunity to acquire the supply chain and the software from the Apex organization, it gave us an opportunity to establish more control into what was our destiny. It was strictly up to Fastenal 100% as to what would be developed and how we would develop and how to prioritize things and what we would address into those expenses from a development standpoint on what should be new within that vending platform. It gave us the ability to carve out a layer of cost. Somebody else wanted profitability off of that program. They don't exist anymore. They're no longer in that layer of cost within the organization. It gave us the ability to understand what are the components and parts and the processes that go into manufacturing and driving these products. We work with supply chains all day long. So there was nothing better than digging into that supply chain and say, guess what we can do better. And we were able to drive a tremendous amount of cost out of that. And so all of that various work that was being done through those time frames allowed us to extend our margin and leverage us from a low teens organization to now it runs better than the company. So it's in those low to mid-20s from an operating margin perspective. So when you look at all that and you say, okay, that's great, Jeff. But I think it's important that everybody understands that Fastenal's success around our technology offering, it is strongly attributable to the human element, right? Human plus machine, if you want to think about it from that way. Those machines need people if they're going to be successful. And we have the expertise of the hardware and the interactions with those. There's 115,000-plus weighted devices out there that we learn from every single day and 115,000 devices out there that need a little bit of love every day. There was over 200,000 configurations where we've learned what's the right way to do it. We're not just figuring out the wheel every time, gosh, what do we put in there? I don't know, vend it this way, do it that way, try this size, try that size. We know. So we've made those processes extremely efficient. We've developed the infrastructure to support that custom build, the implementation, the removal process. So when you see the 16 solution centers. That's critical. This is 115,000 units that are just churning and burning. The inside of those devices are constantly being updated to meet the customers' needs. We're not static. We don't drop a device and walk away. We evolve with the customer. We evolve with our program. When Bill and Bill's teams go out and grow business, when Casey's teams go out and grow business, something has to typically happen with that program. So we might be pulling devices out and putting other devices in its place because we're making sure that the technology fits with the supply chain that's there. When you look at the 16 fulfillment terminals, they're teaching us how to pick, pack and ship product better. One of the most expensive parts of the program is that local labor piece and the fact of how are they pick, packing and shipping into those devices. So how do we continue to help them get better? How do we bring efficiencies into their business? And that lift concept has done that for us. It's been a great opportunity by taking those 16 areas and helping us understand how do we move from picking and shifting a responsibility of sorting that product to make the delivery to a branch location locally and how do we keep that in a distribution center where we have economies of scale. So we've done a fantastic job with that piece of the operations. Then you go up to the -- at the top, right? You must account for the fact that Fastenal's -- the fact that technology and the supply chains, they don't service themselves, right? They say some Star Trek episode where somebody pushes a restock button on the machine and the product just automatically appears. People got to do that work. People have to take care of that. Fastenal knew that. Fastenal knew that back in the early days that the local support, those 3,600 locations and those 16,000 people that are in those local marketplaces, that's what makes the technology work. It's not the fact that a coil turns. It's not the fact that somebody can scan an RFID badge. It's the people who are supporting that top technology that has made this program the success that it is today. Those individuals are supported by about 175 individuals in the field various titles who are making sure that those teams are getting the support that they need. As technology enhances and it improves over time, as new people come into the organization, as we learn better ways to do things, they're constantly educating the field and working with our customer base on making sure that they understand what are best-in-class practices, where is an opportunity for them to make a change to get better today. And then they're supported by another group of individuals who's doing 24/7 support. 24/7 support, whether it be an employee or a customer anywhere around the globe, you can contact us, and we will help you figure out what your issue is. You've got an air code on a machine, call me. Lights go out, call me. Something doesn't work, call me. We have people that are going to address all those needs. It is this team behind the machine that is what our competitors have failed to do. This is why Fastenal pushes so hard on technology because we have the model which can support technology in the field. If you don't build the infrastructure to take care of your technology, you're going to struggle with technology. It's going to be difficult. We took care of that first. We put technology on top of that. And now we have the luxury of just continuing to refine those processes and improving that operating margin. So while the industry often views Fastenal as a vending company who services vending machines, and we promote the fact that we have consumption reduction, it's a lot more to it than that. We're not just a vending company who tells somebody we can reduce your walk-in wait time and you're going to spend 30% less on gloves because you dropped a vending machine. Customers are now seeking answers to data-driven decision-making. They want to understand the behaviors that are going on in their business with their products. They want to know how their employees are interacting with those products. They want to know what is my inventory investment in the different areas within my facility. They want to know what their restock behaviors are. They want to know what's going on with their assets. They want to know what their supply chain depth is on the products that are supporting their operations. They want to know what their overall working capital is. These are all questions that cannot be answered when the data collection stops at the dock with the crib window. That's how the majority of our competitors' operations stop. The information that they have stops when they drop it on a dock. The information that they have stops at the crib window. So how do you continue to advance and answer those questions for a customer? Fastenal has that data. We've deployed the technology onto the shop floor to make sure that we're collecting the data on what's happening on those activities inside the 4 walls of the business. So as we continue, you hear about total cost of operations analysis, right? So to get to the answers to those questions, you have to benchline that. And so organizations go through and they want to answer all these questions. This is our average. Bill shared it with you as well. As we look and study, I think he said it was over about 400 organizations. It's a 21.6% savings. So when he looks at that, the quality of the results that come out of those estimates has to do with the data. So where do those organizations get their savings? When they're trying to do SKU rationalization, when they're trying to figure out what -- how to reduce and what inventory they should stock where and how much, when they're trying to understand how to consolidate their vendors, where is their data coming from? Are they guessing? Is it solid? Are they getting it from 5 different vendors in 5 different ways? Our programs bring consistency and quality to that data, and that's a big part of what we do every day. And it's all because of on the right there, those planograms. We start by building the digital planogram with everything that we do around Fastenal managed inventory so that we can set a baseline for what that data is so that we can answer all of those questions, and we can give people data-driven decision-making, not this is how I feel about your inventory. So finally, as we look at the recent innovations that we've had around FMI Technology and how we've positioned ourselves so that we can be successful in the future, our focus on executing that Industry 4.0 road map, that's what's allowed us to make this transition so that our business has moved from just a traditional supply chain provider for our customer base to one who's more focused on advanced analytics and is driven by data. So by implementing our FMI Technology programs and leveraging all of this various data that we collect, we can provide our customers with much richer, deeper insights into the operations, allowing them to make much more informed decisions around what's happening inside of their business. It is the digital planogram. It's that strategy that was -- that has implemented this game changer for Fastenal. Yes, we're a vending company. It started at vending, but it's advanced far, much further than that. When you think about our planogram capabilities, the vending piece is a very small percentage of the SKUs that we actually collect data on. You're almost talking tenfold results when you start to introduce how we can collect data outside of vending now. So this has been a huge game changer. So as you look forward into Fastenal and you say, hey, where is Fastenal going? We have a commitment to continuous improvement and innovation, and it's going to keep us on the forefront of supply chain technology, not just a vending company. We're well positioned to lead the industry by providing our customers with the tools and the insights that they need to optimize their operations and to achieve their business goals and to be an organization that supports them in their journey to become a data-driven enterprise. So with that, no better time than the present to transition over to Kevin, so he can give you a little more insight into our data story.

All right. Thank you, Jeff. You guys hear me okay? Kevin Fitzgerald. So I've been with Fastenal for almost 25 years. You guys all know that, that's a very important mark in our company, and I'll celebrate mine in 2 months. So I'm really looking forward to that. I moved to Winona in 2014. And in 2018, Dan asked me to get involved in pricing for Fastenal. Now I'm going to talk to you about data. But -- so I know you guys are itching for questions for sure. But one of the things that I was just thinking about is 2018, we obviously had tariffs. We had the highest inflation we've ever seen. We had COVID. We're in tariffs again. Clearly, this picture was taken before all of that went down. And the other person I was thinking about a lot lately since Bill was talking about Vandelay Industries is for George Costanza right now because weren't they an importer or an exporter. So oh my gosh, I mean, that he's probably a lot grayer than me right now. So thank you very much for the opportunity to speak with you all. I'm going to talk to you about data and data analytics and the journey that we've been on. And we've referenced data a lot in this session, which has been fantastic. It is some secret sauce that we have for sure. Jeff just did a fantastic job of talking about that. But what I want to do is kind of give you a peek behind what we're doing internally with that data and how we're using that not only internally, but also how we're going to externally focus that data to our customers and show our customers some of the things that Jeff was just talking about and show you a glimpse into what that might look like. So one of the things -- this is about 1.5 years ago, and we all sat down as some leadership -- as a leadership team and decided working collaboratively with IT and decided what we need is to move data analytics out of IT. Now I know companies do it different, and I know there are several different ways, but we just knew with our culture and with the stakeholder groups that we have, we felt the best decision was to move it out of IT and not separate from IT but work hand-in-hand with IT and form a business-led data analytics group. And so that's what we did. It was about 18 months ago. And we set out with this strategy. The first one was to modernize our data infrastructure. One of the unique things about Fastenal is that we're a lot of homegrown systems. That is extremely important as we collect all of this data. But we did need to modernize it. We needed to get it in a location like a data lake. We needed to modernize that into some other tools. We've really just finished a huge implementation with Microsoft Fabric, and that's been an incredible journey. It allows us to really use our data in ways that we've never been able to use it before. So that modernization has been taking place for many, many years, and it will never really not take place because we'll always learn things about new things. But it has really put us in a position. We've accelerated that in the last 18 months. The second one is data governance. So this is another thing that from a governance standpoint, you guys have all learned a lot about Fastenal over the years. And one of the things is that decentralized decision-making, that decentralized culture. Data governance doesn't always play nice with decentralization. And so what we did is we kind of flipped that on its head. And we said, you know what, the business owners are the owners of that data. So Jeff just talked about FMIT. Jeff Hicks is the owner of the FMIT data. So if I'm in sales and I want to use FMIT data, I've got to go talk to Jeff Hicks about that. That has completely transformed our company. And it's amazing some of the conversations that we're hearing because we're now all starting to get on the same page with exactly what some of the key data metrics we're tracking are. And data governance, again, we've started this about 18 months. So we're still a little early in this journey, but it has been a really big transformation for our company and really exciting actually, too, because some of the conversations that we're having internally are exceptional. And we're starting to learn more about how to utilize data in a different way. The other thing we did was we created a business-led business intelligence team. So really, what we did is we said, all right, we're going to go hire a lot of really, really smart people, people with data science backgrounds, people with data analytics backgrounds, people who put data visualization reports together through maybe Power BI or other platforms, and we aligned them with the business. So we would go to our operations side of our business, and we would sit down with operations and we would understand their data and make sure we understand how they're using their data to build KPI reporting or to look at some more prescriptive type models. We would sit down with our sales teams, our branches and our on-sites and our RVPs and try to figure out what do you want to see? And how do you want to see it? What's going to help you with your decision-making? What's going to help you with growing your business? We aligned with Jeff. And we aligned with Jeff specifically for not only the size of the overall business, but to really focus on that customer-centric approach and what data we can show our customers externally to help drive more revenue and provide more value for our customers. One of the other initiatives we had was self-service. So again, decentralization, we have a lot of people who want to have access to a lot of data. And it's because they're innovative and they want to be able to look at it and analyze it, we want to bring that data to them in a governed way. We want to democratize our data so that the people in the field, our district managers, our national accounts, our regional finance managers, the list goes on and on, can utilize data that they should have access to, to help make better decisions to help guide wherever vision they have for their specific department. Again, some of the technology we're using today allows us to do that. And so that's a big initiative for us that we've just started this journey on, but to be able to give self-service data to the field, self-service data so they can do their own analytics, and they can create their own reports and they can make sure that they're providing value for whoever their stakeholder is. And then lastly, identifying critical reporting and critical data elements. You guys are all analysts. You guys are all someone that looks at our data very, very closely. And you probably have very good insight into what our critical data elements are. But we want to make sure that the definitions you're looking at are the exact same definitions that our RVPs are looking at, that our DMs are looking at. So we spent a lot of time making sure that we're cataloging that data, we're governing that data, and we're making it accessible to people to use it in a governed way. So really exciting things taking place from a strategy standpoint. And what were some of our goals? Some of the goals when we sat down and really started to think about how and what this would look like. The first one is identifying new opportunities. Bill and Casey and Bill, they did a fantastic job of talking about what the prospects are within our organization. Well, a lot of that information came from a very big initiative we had called Customer MDM, Customer Master Data Management. The bucket reporting that you see on your tables. But when we look into a customer site, that's where the secret sauce is. We're able to see, all right, if this customer here today is in this industry and they have this many of employees, this is about what they should be doing with us. And if they're not doing that, there's wallet share opportunity. We also are able to identify additional customers that fall into those same categories so that we can go call on new acquisitions, gain more contracts, gain more customers. So the analytics that we're doing within customer allows us to not only grow our customer base by gaining more customers, but also by increasing our wallet share. Decision-making. Again, we're a decentralized organization. You all know that. And decision-making -- what we all believe, decision-making is that we make the best decisions when we are closest to the customer. Our job is to provide our branches, our on-sites, our district managers with the best data that they can have in order to make those great decisions. And the thing is, is that what we found is that if we present our teams with this type of information in a very centralized way, in a very clean and organized way, they do make great decisions, and they're able to grow their business, they're able to make really good -- or bring really good value for their customers. Improved customer experience. That's a major one on this list. And again, Jeff just talked about all of the data that we capture from our FMIT devices, really from our entire organization. We want to be able to give our customers that prescriptive and predictive modeling to help them understand what they should be buying from us or what they could be buying from us through trends and analytics. I'm going to spend a little bit more time on customer experience here in just 1 second. So I'm going to drop down to fostering innovation. Again, another incredible reason why we established these goals in this department was to foster innovation. As you know, that's one -- that's part of our culture, and it's part of what drives each and every one of us every single day. And so being able to work within data, being able to understand all the advancements that we're seeing within data analytics on a regular basis, bringing AI into the conversation, these are all things that are driving us within not only our team, but a lot of teams within IT as well. And then lastly was improving productivity. I've mentioned many times that what we want to do is bring self-service data to our employees, to the field. That is going to improve our productivity. Really, when I think about improving our productivity, if I was -- if I go back about 10 years, 10 years ago, we all still had data. We all still wanted data. It just might -- it took us a long time to get that information. We had to e-mail a bunch of people. We had to ask our boss. We had to do a lot of different things. I believe we can be more productive with how we analyze our data if we bring self-service to our teams. And so that was a big, big part of why we started this initiative as well. All right. So improving customer experience. This is -- this is the secret sauce. This is the -- these are the things that are going to help advance us well into the future. And what I want to do is just show you all exactly what we mean by this. So this is FAST360° analytics. FAST360° analytics has been around for a long time. It's been around for probably 7 or 8 years. And it's a great platform for our customers to be able to go to, to get the data that they need. And a lot of it is just transactional data today. It might be like here's what my spend is, here's how much we owe you, here's my open invoices. But what we've done recently is we've brought FAST360° analytics to fastenal.com. So now our customers can -- while they're on fastenal.com, they can log into FAST360° Analytics and get everything they need from a data perspective. Here are just some examples of what someone coming in at a site level, right? So at a customer level, what they're able to see. They can go into my inventory. They can see their spend. If they have vending machines, they can see exactly what their vending machines are, where they are and what's inside of those vending machines. FMI Technology savings is going to show them what kind of investments that we've put inside of that customer's facility. So if you've got -- or Bill did the $1.5 million with all the locations with Vandelay Industries, FMI Technology savings is going to show them that, right? They're on FAST360° analytics. This is also where our customers see their cost savings summaries and their cost savings project overviews. And this is a really key piece to FAST360° analytics because it drives participation within our customers to come and say, we said we were going to do a safety survey. We said we were going to do this, and here it is right here for them to go say. When you're also in FAST360° analytics, you also have the ability to look at our relationship with Fastenal from a global level, from a contract level. So when we talk -- when Bill talked about how procurement has changed so drastically over the last 15, 20, 30 years, now you have procurement managers who want an understanding of exactly what's happening across their entire landscape, not just their one facility. So FAST360° analytics, again, also brings that ability to look at it from a global level to see exactly what the entire contract is doing and not just that one single site. We get a little bit more detail. We probably get a little bit more analytical within this type of reporting. And this has been extremely well received by our customers. We have about 20 to 50 customers that we actually do customized reporting for as well to some varying degree. And that's where they come to us and they say, here are my KPIs. Here's the information that we want to track, and we'll customize that reporting for them and put it on FAST360° analytics. Now when I mentioned our business-led business intelligence team that we developed, a big part of that team is dedicated to this because where we see this going is being able to introduce more prescriptive and predictive analytics for our customers so that they know the trends that they have in their business, what it is that they're buying, what could they be buying, what should they be buying based off of their behaviors. And this is where a lot of our team is focused in collaboration with Jeff's team to make sure that we're producing the right reports. Just some previews that we're going to roll out at the customer show here in just a couple of months is something we call My Vending Insights. My Vending Insights is -- and I'll show you a quick screenshot of that, is just a deep view into their relationship with our FMIT program. It shows exactly -- and again, this is from a global level. So this could be somebody who's taking a peek into 60, 70 different locations across the globe and what their vending platform looks like, number of machines, who's using what, what products are moving the fastest? How do you -- like who is actually using this product? Who's not using this product? Where have we placed machines that aren't very successful that we should be placing them somewhere else? This is right in our customers' hands, and this is exactly the type of information that they've been asking us for. Some additional reports that we're working on and we'll be rolling out in 2025 are more rationalization type reports. So across 50, 60 different customer sites across one organization, they might buy 100 different pairs of gloves. Well, we want to look at that and say, you know what, you should be buying these 5 different pairs of gloves from us. And here's that information and here's exactly how to do that. And here's the savings that, that would allow you. So really exciting things happening within FAST360° analytics and the reporting that we want to deliver to our customers. And then lastly, over the next several years, we want to introduce our customers to a digital front door. We are going to brand that FAST360°. It's our relationship with that customer. It's everything that we have going on with that customer at any given time. FAST360° analytics is a big part of that. But there are other elements to it as well. We should be able to go -- our customers should be able to go into FAST360° and do user management, who permissions of who can do what, vending user management of who has access to what machines or what products. Their Fastcrib relationship with us, e-commerce and customer profile management. We believe this is going to enhance the value that we bring. We believe this is going to enhance our customers. And this is something that we will be rolling out over the next several quarters, but really exciting things that FAST360° and the digital front door will do. And with that, I am going to pass it over to Donnalee.

Good morning. I'm Donnalee Papenfuss, and I am the Executive Vice President of Strategy and Communications, a position I accepted last November. So I'm going to take a minute and share with you my journey at Fastenal to put into perspective, somebody with a contracting background and expertise and specifically in government ended up in the Chair of Executive Vice President of Strategy and Communications. So for the first -- I was recruited, as Dan mentioned, into the company to help spearhead and develop the foundational capabilities for government contracting for Fastenal. I had 10 years with our State of Minnesota's Procurement Technical Assistance Center prior to coming to Fastenal, and I brought that expertise into the company. And for 14 years, I served in 2 roles, first as the Government Industry Specialist and later as the Director of Government and Diversity Affairs, supporting our government sales teams. In 2014, I accepted a position of Vice President of Contract Development and Support. And that's when the type of work shifted from contract compliance, contract proposal writing, contract administration into developing the systems and capabilities to support all of our contract sellers. One of the first things that we did was implement our Microsoft Dynamics CRM, and that is a system that we have had for 10 years now. It creates the ecosystem that supports all the workflows and the processes that Bill and Bill described this morning. So as we take our customers through that sales cycle of prospect to opportunity to contract negotiation to contract execution, our CRM is the system of work for all of those sellers and the system of work for all of the support teams, a lot of whom I lead who do the proposal writing, the contract negotiation, the contract setups, et cetera. Another thing that happened in the mid-2000s, 2015, '16 was Bill came to me and said, I really need a solution for sales enablement, and that was the beginning of our sales enablement department and the creation of a sales enablement center, which was our first foray into knowledge management, and that's a SharePoint online site that is the curation of information that all of our sellers need to do their jobs. It's for role readiness, for upskilling, for access to resources to enable our sellers. In addition to knowledge management and communication and the back shop services of CRM, I'm also the business manager for -- the business owner for our chatbot Blue. And that again plays on those skill sets of knowledge management. We have a knowledge base that's supported by 250 content admins throughout our organization, and that has evolved recently into Blue AI or digital chatbot, which you'll hear more about today. A few years ago, I was asked to support our efforts around our ESG initiative, and I currently lead the ESG community of practice and a lot of communication around telling our story relative to ESG. Last year, Dan had asked me to support the strategic planning process. The governance Board had challenged our executive team to be more formal with our strategic planning, and I was asked to get involved with putting some process around that planning process. And we worked with our executive team and some advisers from the Board of Directors. We settled on a strategic planning model. And over the last year, we've put together a strategic plan. And the -- what we're sharing with you today are our strategic objectives of more effective selling, enhancing our services and expanding our total addressable market share. We also identified a number of accelerators that you'll hear about throughout the day that help us achieve our objectives and achieve our strategic goals faster. Things that we were mindful with this formalization of the strategic planning process was to not lose sight of the fact that at Fastenal, our best ideas happen organically and bubble up from the people closest to our customers. So we're mindful of how you formalize strategic planning without in any way compromising the innovation that happens in the field. As the Executive Vice President of Strategy and Communication, I'm responsible for our employee engagement strategy. We focus on purpose, autonomy and expertise. And one of our strategic accelerators is the employee engagement platform. We're considering and investing in an employee engagement platform. These are the types of features that will be part of it that we're looking for. It will serve as our company-wide communications platform. It will have digital assistant features, social media like. The role-based curation brings us back to Blue AI, which is the ability to curate based on roles, information. The communication and knowledge management considerations include what kind of velocity and volume of communications will an employee engagement platform demand? And how do we manage the personalization aspects through role curation. This is an example of what a question looked like with Blue, our chatbot, when it was just a chatbot and the question is simply what is vending and the answer is a simple response based on a match of a question-and-answer pair. And now that it's Blue AI, Blue is consuming the documents as well as the questions and answers in the knowledge base. It gives a more rich text narrative response and identifies the documents that went into the response and then also provides additional prompts. And that concludes my presentation.

All right. Thank you very much. So we're going to -- we have a little bit of time again for some Q&A before we break for lunch and a quick break. But as I've tried to do with each of these, maybe just a little insight of what I hope you took out of this. FMI, when I have conversations with everybody in this room, vending seems like an afterthought in many respects. And there's a reason for that. It's been 15 years that we've been doing vending. What I wanted to reset in your own minds is if you remember the chart that Jeff showed, we have more stuff getting released in the last 5 years than we did in the preceding 10. The innovation in FMI is accelerating, not going stale. And that innovation is around the idea of gathering more and more data. The click that you have in front of you, the vending machine gathers data on certain types of product. The bins gather data on certain types of product, things on skids, on shelves, don't lend themselves to those kind of things. That click, as simple as it looks, fills in a lot of the gaps, as Jeff said, and allows us to collect data because where this industry is going is that data is becoming a greater and greater piece of how competition is won. And what you hopefully got from Kevin and Jeff and Donnalee is we've taken very seriously over the last 18 months, how we structure our data internally for our internal stakeholders and our external stakeholders. And with that foundation, Donnalee has led a process where we're building additional tools to take advantage of the data advantages that we have because where I would tell you and what Jeff indicated is there's a lot of companies -- every company collects data. A lot of our competitors collect great data at the dock. Their customers have a lot of information about what's been bought, when it arrived to a certain place. There's very few companies, if any company that can do what we do in terms of not telling you what's been received, but telling you what's been used, where it's been used, how much of it's been used, how it's been used, how you can improve that user because we take -- we get the data, not just at the point that it's delivered to the customer, we get the data at the point of use on the line. And so again, I wanted to make the point to the team. I think they've done so ably that FMI is a core piece of the toolbox. And it's not just a device. It's a gateway in a very serious sense that gives us an advantage in this marketplace and data in a market where data is becoming a bigger advantage, particularly when you think about the smaller competitors that still make up 70% of our market, they can't do what these teams can do, gives a huge advantage over time. And obviously, I think our point of use. So hopefully, that's what you sort of got out of that. We do have some time for questions for this group. Again, raise your hand with questions, and we'll hand you the mic.

I don't have a question. I actually have a thank you. First off, for everybody in the room, I realize listening to 12 different presentations today must be painful as hell. And I thank you for not only being here because I suspect there's some folks that this might be -- if you have young children, this might be spring break week or you're leaving tomorrow on spring break. I was talking to one person last night, and they were in that boat and their spells wasn't very happy with them for being here. So I appreciate the fact that we have a group the size here. I want to say thank you to these 3 presenters. And the thank you is in a different vein. The first one is the Jeff Hicks, and you might not have noticed this, Jeff had a pretty tight script. You give Jeff a 20-minute talking session. He will fill all 38 minutes of it. And he held to the schedule, which is really important, and we'll see on his next round if he's able to do it a second time. To Kevin Fitzgerald, Kevin alluded to it. Kevin is very involved in our tariff activities and how we manage that. Those questions are out of scope right now. They can be handled later. But what Kevin does is every week starting about, I don't know, 5 weeks ago, 6 weeks ago, he records a video that goes out to our entire organization. And he shares with our team in a 7, 8 -- I think the last video was 13 minutes. So he got a little carried away. But about -- in a less than 10-minute video, here's what's happening and here's what we're doing. And here's what it means for you. And here's a bunch of information that's embedded in the sales enablement center that Donnalee talked about for -- here's a professionally created letter that you can provide to your customer to explain what's going on. And it's an incredible tool because every one of our customers is in a wait-and-see mode because day-to-day, everything changes. And it used to be -- we used to joke in 2018 about, hey, the latest tweet, everything just changed. It's not tweeting anymore per se. It's coming out in different ways. But this tariff stuff is really fluid, and it's really chaotic for our customers. And our job as a supply chain partner is to help them through that. And the authenticity that Kevin gives when he's providing that information is unbelievable. And he records a version that goes to the Americans. It's made available to all the folks in our organization that aren't in the United States, but it's very U.S.-centric. His video that he's recording this weekend, there will be a version that goes out to folks in the Americas outside the United States, so they get a view of that. And then there's a version that goes out to the folks outside of the Americas, so they get a view of what we're doing. Everybody can see all 3, but it allows them to have a different lens on the world because invariably, 2 weeks ago, I was in Bangkok visiting a customer. A week after that, I was in Kuala Lumpur visiting a customer. It's as chaotic for them in Southeast Asia as it is for us. And so having that lens of talking to -- when I was in -- I probably shouldn't mention customers, but when I was in Bangkok, I visited Harley-Davidson plant. Imagine what they're going through when you see all these tariffs getting imposed. And for them, it's downstream, but it's also upstream. Our job is to help them navigate that. And for Donnalee, way to go. Donnalee was kind of nervous about today. And I think she did an awesome job presenting to the group. Thank you. Now I'm going to shut up and let the Q&A go.

So it's interesting, a lot of data here, a lot of opportunities to add value to customers and to your own operations. But I'm wondering if there's any chance that at some point, data becomes actually its own business? Are there opportunities for you to monetize that with some sort of service rather than providing it as a way to build a moat around your business?

Okay. We've talked about that internally. And maybe somewhere down the road, that is a thing where we can monetize some of the information that we have. Right now, where we are in our journey with this, I think it's great leverage to gain more business when we provide the insights that we can give for a fastener or for a glove. And if we can do that, then why couldn't we do that for your fluid power and transmission product or your motors or whatever the case might be. And so right now, in our journey, I believe it's more about leveraging our data in order to grow more wallet share within that company. But down the line, I mean, who knows there's absolutely opportunity for that.

And maybe if I can just follow on, on that quickly. Do customers feel like they own that data from their organization? Or do they kind of think that you own it?

It probably depends on who you talk to on there. But we're taking the approach that it's their data, and we will provide that data to them in a way that is useful to them, right, it's useful, but we also want to bring value with it as well. So that's where we'll put the analytics within it.

I think an interesting way to look at that is it's not so much the data that they crave as much as the answers to the questions from the data. So the important thing is what are we doing with the data to answer the questions they have. Why does everybody want reporting today? Why did Kevin gave the example of I had to e-mail 5 people across 3 different days to get a bunch of different reports to find out I didn't have what I needed to ask somebody else for another report to now I have my answer. They don't want the data. They want the answers. Now I would be willing to challenge that most people don't understand that yet. They think they need the data. But when they start to see the answers, think what AI is doing for you today in your chat box. You want -- you thought you wanted data. Now you just want to talk into your phone and get answers, right? I think we're moving to that world. And when we move to that world, then it becomes how does the customer base value the various services within the supply chain that we have to offer and how are -- what are they willing to pay to have accessibility to those types of services and the quality of data around those.

So just to follow up on that. So are you able to provide to your customers insights across the industry relevant to them based on aggregate data from all the customers? Like you're operating at 5% on this metric and the average is at 20% and here's how we can fill the delta.

Yes, absolutely. That is where a lot of this vision is going to be able to benchmark customers against their own industry or number of employees or product categories that they're purchasing today and benchmark them against others. And so that will bring a lot of value to a lot of different organizations.

Is that insight they have something they have to pay for or what follows is what they have to pay for?

Right now, it would be what follows is what they will be paying for because we want to really leverage that to grow more categories, grow more business.

Just on 360 analytics, I guess, do you have a sense for what percentage of customers are actively using the platform today now, whether that's daily, twice a week, however you define it. But do we have a sense for what that percentage is? And then bigger than a shoebox idea, how much faster are they growing with you if they are engaged with that product?

The second question, I wouldn't know the answer to right up the top of my head. But as far as the engagements, we have a lot more customers today utilizing our custom reports that we have on FAST360° analytics that I referenced. I didn't show a custom report, but where they're telling us what KPIs they want to measure within their organization and even in some cases, providing us with additional data to help visualize for them. And in that case, we have a lot of adoption. As far as some of the reports you saw on the website, we have customers coming in and out of there on a regular basis because that's really how they get their transactional type information from us. But I don't have specific numbers.

One question, one follow-up, please. Yes. So in terms of the delivery to Fastenal of the information, so the minmaxs, what's in the vending machine, the bin stock, the weighted devices, there's all these methodologies that transfer that information over to Fastenal like, hey, this should be reordered because it's at that level. When it gets to Fastenal, how much of -- or what percentage of the sales of the company right now happens without human intervention? Or does every single one of those things have to have a human put their eyes on it before that order goes out? And what's the opportunity there?

Yes. So there is -- a human does put their eyes on that. And so today, when we report that from an FMI perspective, roughly mid-40s, call it, 45% is touching that FASTStock, FASTBin, FASTVend. And those are orders that somebody is scanning, taking across, it hits the local point of sale. And then a human being has an opportunity to look at that and review that and say we're ready to go. Because when a bin hits an enclosure, like say, for instance, RFID, it doesn't need to be replenished today. That would add a lot of cost to the system. Every time somebody threw something in an enclosure, I immediately process that order. I process a lot of orders instead of bulk orders. So it's about keeping an eye on the data and understanding when is the appropriate time. So they're collecting that request data in terms of I'm ready to have this replenished. And then the local store is understanding what is the ideal service schedule and they're processing that. Now because they have visibility to all of those individual SKUs, especially when you think about FASTBin and FASTVend, they have the ability to understand, oh, they just have parts that need to be reordered versus, oh, no, something critical is happening in the business, I need to react right now. So yes, so we don't want to flood a lot of individual picks. We let them build so that the local branch can say what's the efficient order process that now needs to take place in terms of pick pack and ship?

Well, and I'm not big on trying to force an AI story onto my companies. But it seems like that sort of thing is where AI excels. You would take something and say, "All right, what is the optimal ship schedule on this? And can I batch these make that happen to free up the people that would normally be looking at that to do other more productive things. And just maybe 5, 10 years down the road, even 3 to 5, you'd think that would be a valuable addition?

For this year?

Yes.

So yes, when you -- when you think about that, it's not so much about automatically -- yes. So yes, so in terms of the ability to utilize artificial intelligence across all of that consumption data that's taking place and the number of restocks that take place and understanding what is the ideal service schedule. Should I service that once a day, every other day, once a week, once a month, twice every tenth day, yes, we have that data because we have the behavioral data and not what went to the dock, as Holden talked about, it's not we dropped off 10,000 gloves to a dock. We know that we dropped off 10,000 clubs and 8,000 went into these different locations. And 2,000 of them went into FASTStock locations over here. So we understand where they're at. So I can set service schedules appropriate for each one of those areas. So I can treat a production line different than I treat an MRO room, which is different than the tool room, which is different than Janitorial closet 1 and different than janitorial closet 2. Today is a human when I'm using in tuition and I'm walking through a plant, there's that nature of I'm walking past the janitorial closet, I should check it. I should check it. No, you don't need to check it. The technology helps you understand and artificial intelligence looking at all that data we have, we'll be able to help that seller locally understand that I don't have to check that closet today because the data has told me that I set my inventory levels right. I didn't guess. I didn't use my gut. And oh, by the way, technology tells me if there's an emergency. So I can keep doing other things today, and I can check that janitorial closet twice a month, and I can focus my time and energy over here. talking to somebody in the facility about where my next opportunity is instead of chasing down a bunch of stocking locations, wondering if there's an order. So yes, so utilization of artificial intelligence to understand what is an optimal service schedule and based upon the optimal service schedule, which could take a variety of things in a difference, how deep is the supply chain, how critical is the part to the customer how often, how big of a delivery do we make when we make a delivery, right? Optimizing the labor aspect of that delivery process. Taking all of those components into mind and saying, this is what your scenario is. And oh, by the way, Donnalee's is going to be different.

Tommy Moll again from Stephens. A question for Jeff, where you're talking about the data, data-driven decision-making. How well does this line up with the incentives at a procurement department. In other words, is there a pull from the customer side? Or is this more you can go into your best accounts and show them a new tool, and they say, "Gee, that's nice. That's a nice to have, but that's not why we're doing business with you?"

I think it is why they're doing business with us. From a procurement standpoint, they're getting paid to find opportunities, right? And so if we're able to break down their numbers and help them understand what's the right amount of inventory that they should have on their floor. And then not only help them understand what the right information is on the floor, but be able to justify it with statistics so that when they go in and talk to their supervisor about why they have the inventory that they do, that we've made these rules up because of how we have. When we bring them information around the variety of products, the variety of manufacturers they use where they place their inventory within their facility. We allow them to help them understand that they're actually creating productivity or they're creating waste in their business based upon employee traffic based upon the number of different SKUs. You could leverage it on price if you would just consolidate from those 100 gloves down to 5. And it brings efficiencies on both sides of the equation. We have the opportunity to improve our scenario there as well. And so it's very expensive for us to manage 100 different gloves versus managing 5. So it does create that win-win. So outside of that, as Bill had talked about earlier, outside of that purchasing individual who's focused on what's my price, yes, it's extremely valuable.

Sabrina Abrams, BofA, again. I have a question for Donnalee. You made a comment -- or I guess, on the slide, comments about expanding TAM by using data analytics. And I was wondering if we could talk a little bit more about that. Obviously, Fastenal has extended their TAM and got into new product areas before. But I guess, how early are you in terms of using data analytics to expand the TAM, what areas or products or customers are you most excited about? Anything you've identified as like a future growth vector. Just any color around the expanding TAM would be helpful.

Thank you. We did do an analysis of total addressable market share in targeted industries and historically strong industries and growth industries. And Kevin's people were the ones that put that together. So do you have anything to add on the analytics part of it?

Sure. Thanks, Donnalee. So from the total addressable market, there are absolutely some wallet share opportunities even within our existing customer base that are very exciting. But also when we think about like I just mentioned like fluid power and transmission product, that seems to be a product line that fits very well with the value we bring to our customers. We can wrap value around that product line. similar things that Jeff was talking about. So I think that's an exciting opportunity. Facilities Maintenance product was another overarching category that we've identified as something that we believe we can bring value to our customers and even within Facilities Maintenance, it opens up a whole new vertical of customers for us as well. So within the analysis we did with TAM, there's a lot of exciting things and a long runway.

So I'm going to ask -- might be a silly question. I'll ask Jeff and maybe Holden. I'm looking at the Slide 52, and you guys showed tremendous progress on the margin at FMIT. I guess the managed inventory solutions, right? You've gone from low teens to low to mid-20s over year period, it looks like. I was just trying to understand. So the margin for the total company over that time is around 20%. It's kind of held steady. So that's why I'm not sure if it's a question for Jeff. Maybe it's a broader question. So the margin ex FMIT what exactly is -- is that even the right way to look at it? Like what's been dragging that down? And maybe that's not the right way to look at it, I don't know. Not sure how this cost is built up for the margin for this program and is it comparable to the total company in the way you build that?

I'll take a stab at that, and Holden will definitely correct me in anything I misspeak on. The business has evolved a lot. So when the bills earlier, we're talking about the CSC -- and I guess, Casey and Jeff did as well, but they were talking about they had all these acronyms they ran through. And I don't know if you noticed at the bottom of the slides I said, hey, if you're going to do all these Fastenal acronyms, you got to define them on the slide. But they talked about CSCs and ODSs, and they talked about all this infrastructure we built. That comes at a cost. And in 2015, when I stepped into the role, one of the things I told the board, I believe we've been underinvesting in IT, and we're going to expand our spend in IT by 50, 60 basis points. And that's going to come right out of profitability. But I believe long term, that's going to allow us to grow better. And I believe it will allow us to capture labor efficiency and do things that are really special in the marketplace. But short term, it's going to take us backwards. We found incredible success with our international business. Our international business is now 16%, 17% of sales and about 3 percentage points of that is outside the Americas. The piece in the Americas operates at a lower gross -- lower operating margin. It's close, but it's still lower than the U.S. business. So as that becomes a larger part of our business, that's created some headwinds. And the analyst community and our shareholders are kind of pesky about that. They like to see incremental margins that pull it up over time and which I wholeheartedly agree with. But sometimes when you're making investments, you have to have trade-offs. The 3% of our business that's outside the Americas, that operates at a much lower operating margin not because the business is inferior because we're always studying that business and saying, is the business -- I was in Lombardi, Northern Italy, for example. And I'm looking at that business with the DMs there. And I said, you know what, I feel like I've been a group of district managers from Wisconsin because you argue about the same stupid stuff. But the health of the business is the same as what I would expect -- is what I see in Wisconsin. The only thing that's different is there's a bunch of overhead things that we haven't leveraged against yet because we don't have the revenue. We do $150 million in Europe a year. That's an unleveraged business, just like Fastenal was back in the early '90s. And in the early 90s, Fastenal, if you look back at our history, we weren't operating -- and the operating margin starts with a 2. It's an operating margin that starts with the 1. And it was double digits, but it didn't start with a 2. So there are some things that are fighting against us from a mix standpoint, mix of geography. 40% of our revenue today is on-site business. That on-site business does not operate at company average. So that pulls us down a little bit. When Jeff stepped into this role, Jeff has an advantage over a bunch of the folks that sometimes step into roles like this. He was a district manager for a longer time than a lot of our employees have worked with Fastenal. So he knows how to manage a P&L. And I said to Jeff, I said, Jeff vending is about 15% of our business, but FMI is someday going to be 60%, 65% of our business. Today, it's in the -- as you mentioned, in the low 40s. If FMI can't get to company level operating margins or slightly better. It's going to be a really painful story for Holden and me to tell. It might be great growth, but it's deteriorating our profitability, our returns and shareholders don't like that. And so we need to figure out how to get better at it. So all those mix pieces and then some delevering in the last 2 years. I mean, when we're growing low single digits in the last year -- last 1.5 years, we're still investing based on the opportunity, not based on today. And the best -- and I personally hope we never become an organization that's able to leverage that 2% growth because I think a lot of folks that are in the organization now will lead that organization. So that's not what they want -- they signed up for. That's not what they want to be a part of. That solves the problem if we're growing at 2%. If it's a we problem, let's fix that. If it's a marketplace problem, it will cycle and it will fix itself and we need to tell the story appropriately. But we need to figure out how to make FMI a gem of the business, just like the rest of Fastenal is. And that's what Jeff is set the task. We acquired -- Apex was a great partner for Fastenal for many years. If I look at Jeff's time line, when you talked about pre- what we did in 2015, '16 when we took over hosting the software, Apex was a great partner in developing the platform. But sometimes priorities don't get underlined anymore. In the post 2015, 2016 time frame, their priorities and our priorities weren't aligned and we went separate ways. They want to focus on other types of vending. They want to focus on vending in -- at a stadium where you order something on your phone and it's waiting for you in a little locker. They want to do a bunch of that kind of stuff. We wanted to develop the software for our business. In 2020, when COVID was hitting, Ken Savage, the owner of Apex reached out to me and said, hey, Dan, would you be willing to buy us out and own the software? And I called the Board and I said, "Hey, I just agreed -- well, I haven't agreed because I told them I had to talk to you first. But I just agreed to pay $125 million for software for the hosting, the vending and the supply -- access to the supply chain. Access to the supply chain dramatically lowered our long-term cost for the equipment and how we could innovate it. Well, occupancy, if you think about that vending machine is just another shelf in our business, that's occupancy expense. It lowered our occupancy expense. The better analytics we have today our average machine doesn't -- we were stuck at $1,100 a machine per month for years. Today, we're at $1,450?

Yes, closer to $1,500.

$1,500. That leverages our occupancy. It also leverages our labor of time we go to the machine. When we were turning on LIFT and holding cut me off when I've gone too long, maybe already have. When we turned on LIFT One of the things they came back with and said, we're picking all this product, and we're kind of -- all we're doing is we're centralizing what the branches already do, but there's 40 coils in that machine, and we replenish off 40 every week. There's 18 coils in that machine that we know based on analytics. It's not going to run out in a 1 week. There's 10 items on the coil and they're only using 2 a week. Why are we replenishing that every week? Let's remove those 30%, 40% of our picks and do it every other week. When we do that, what we could bring to our customer is a more efficient supply chain, we can offer them a better price. We can pay our employee more if they're more efficient. And by the way, it raises the operating margin of the machine and the returns. So those are the things that are happening, but we're also taking those dollars. We're investing in IT. We're investing in all these lean teams and all this infrastructure. We're growing our international faster because we're excited about what that means 5 and 10 and 15 years now for our employees, our customers and our shareholders. But they -- and we're growing our on-site business really fast, but they all -- it's trade-offs. We think it's been an attractive balance of the 2 because I mean, our returns on capital are better today than they were 5 and 10 years ago. And 1 thing I learned -- Bob Kierlin, I don't know if everybody in this room knows this, Bob Kierlin passed away about a month ago. Our founder at Fastenal. He's 85 years old. I had a nice chat with him 2 weeks before, and he was excited about stuff he's working on has ever and animated and he caught us all by surprise. We have had some discussions with the reporter from the Wall Street Journal. I got a text from that reported earlier today. It sounds like that there's an article in Bob Kierlin that's in the online version of the Wall Street Journal right now. It's going to be in the print version this weekend. If you get a chance to read it, I haven't read it yet. So hopefully, it's not something I read in cringe. And -- but one thing he always said, it's not about gross margin, not about what product we're selling. It's about are we providing solutions, it's not about operating margin. It's about growing our business and getting a return. And that's what we obsess over. And we're more concerned about that, quite frankly, than are we at 20.2% operating margin or 21% or 23%. Now if you're a district manager, having a call with Dan -- I have a call with every DM over the course of the year, 25% of my year is spent in conversations with district managers talking about their business and the future of their business and how they recruit and how they develop their team. And in those -- I guarantee you, there's a discussion about where their branch operating margin needs to be, where the returns has to be, where their on-site operating margin is and where the returns need to be because we're very focused on that. And as you saw from Casey's numbers, our operating margins are higher than the U.S. than they are company-wide, but they get diluted. Our branch operating margins are higher than the nonbranch operating margins. So they get diluted a little bit, but we think it's a great business, and we love what we have, and we just want to grow it.

Us to lunch. We intended it to be for about a 20-minute launch really because you do have a lot of speakers and content, I wanted to make sure you had some time to check your e-mails, grab your lunch, feel free to bring it into the room and we start in about 20 minutes and while you listen and take in the information. Thank you. [Break]

All right. We're going to begin again. So for this next section, we've been talking a lot about the toolbox and how we believe today, we have the most comprehensive capabilities and such in the industry. And it's the enormous reason why we grow the way that we grow historically in the future. The toolbox is ever evolving. The FMI was an evolution in our toolbox, which as we pointed out, continues to evolve, in fact, at an accelerating pace. On-site was an evolution in our toolbox, but again, a piece of a very comprehensive toolbox. The folks that we have talking here for the next few presentations is really talking about how over the next 24 to 36 months, you're going to continue to see our toolbox evolve with additional capabilities and additional technologies to continue to drive additional value to our customers. And so with that, we're going to turn it back over to Jeff Hicks.

All right. Well, you get me twice today. So I don't know if you're lucky or being punished by Holden, one of the two. So again, Jeff Senior Vice President of our solutions. One of the newer areas of the teams that I get to work with, so it's not new to Fastenal is FASTCrib. So that's what I'm going to touch on today. Feel free to continue on with your lunch there, and we'll move on into FASTCrib. So you may be going. I've heard of this before, or others are going, what is FASTCrib. It's an inventory management software program that's designed to streamline and optimize inventory processes for businesses of all different sizes. The software has been around for a while. It started out as a third-party application that over time is transitioned into a program that's supported strictly by Fastenal. So we take that responsibility for now for how we develop, but why we develop it and so forth. So over the years, we've been able to work with this individual program. We've learned a lot about what our customers want and how they want to interact with such a software program. And we've adapted it over time to address these various needs. And so currently, we're working with about 200 customers who use this software and they provide us with a wide variety of suggestions for enhancement opportunities that we're working with. But what we've learned is as our business shifts towards more of those larger programs, which find where our customers are finding value in those local assets that we bring to the table when you think about on-site programs and our branch capabilities. This software is starting to pique our interest in terms of the value that it brings to Fastenal. To support this shift, we've determined that now is a good time to invest in improving FASTCrib and our ability to be able to scale this product outside of what its capabilities are today. So this software it allows for us to perform a lot of supply chain service activities. So if you think about a program that's given us the ability to address inventory management, procurement activities, asset management, when you look at things like maintenance or work order management, gives us the ability to step outside of just product and be seen as a service provider as well. So this comes that technology tool that Fastenal as well as the customer can work together in a similar environment. So if you think about FMI Technology today, we do a lot of those types of activities, but it's strictly around Fastenal products. Fastenal provided products program working within Fastenal's point-of-sale system. This gives us the ability to have a software program where we can collaborate together. So FASTCrib, it plays an important role in how we expand our inventory management and supply chain service capabilities. We've already demonstrated our leadership in FMI. So when you think about how we've deployed technology throughout the supply chain activities and how we're able to provide quality analytics around those FMI programs. We've done a fantastic job establishing a standard in the industry for that. but we're also performing a number of numerous activities daily that our customers are duplicating as well. So again, those activities that we talked about from a software tool standpoint, how do we take away or give the opportunity to add as a service, let us help you with your inventory management of non-Fastenal products. How do we address the ability for them to incorporate our FMI technology into non-Fastenal products? And then how do we help them do a better job from an asset management and a work order perspective in addressing things that we work with today from a preventative maintenance perspective? So by focusing on enhancing the software, we create an environment that's going to create that collaboration between Fastenal and our customers. We also create an environment or a mechanism for us to communicate and share data better with our customers. and for them with us from a standpoint of around those various activities, we now have this central software point to where we can share the appropriate information with their ERPs, they can share back to us. We can consume things in our point of sale, we can push those back and forth. So we create a tool that makes the activity of doing all of those things together in a single environment. So no matter what the size of the customer is, so whether it's that customer who's spending over $50,000 a month with Fastenal today or that smaller customer who's spending more along the lines of $10,000 or less with Fastenal today, there's functionality throughout this software program that people can grab on to a little bit of the opportunity that's there or they can address the entire program. So if you look at some of those different activities that are there, it's fair to say, I think, that Fastenal offers a best-in-class type deal and environment for customers when it comes to managed inventory. And so because of this, our customers are constantly asking us to do more. that's how that on-site kind of came about, right? And that's how a lot of our product growth has came customers coming back to us and going, can you do this? Can you do this? Can you do this? So from an inventory management standpoint, I think probably every day, somebody in an on-site, a type environment or in a lot of our larger customers you say, well, can you manage this for us? And not all of those products are core to Fastenal. So this gives us that capability and gives us the opportunity to say yes now. So as we integrate a program like FASTCrib, we can say yes to some of those things that those products just don't make a good fit for Fastenal to sell but I can take over the management activities within the supply chain for those individual items. Gives us the ability to take all of that content around that information and contain it in 1 particular area so that information becomes more streamlined. When they want to do exercises around vendor rationalization or SKU rationalization, we have the ability to help them out with that. gives us the ability to introduce our own technology into the supply chain as well. and allow them to use what is Fastenal managed inventory technology today, but use it on parts that Fastenal is not the core provider of those individual goods. So an opportunity to provide a service and charge for that. there's a sourcing and a procurement mechanism to this. If you think about it, we buy a lot of product from an organization perspective, we buy billions of dollars with the product annually. So we're kind of pretty good at what we do. Our branch environment as well has learned to be extremely nimble and very good. Jeff talked at the beginning about the number of purchase orders that a branch can cut in a given time frame. We have a lot of individuals in Fastenal that have the ability to do sourcing and procurement and do it efficiently, and we have those tools. So how do we create that opportunity to tell the customers well, we can help you with those activities as well. This program gives us the opportunity to do that. From an asset management standpoint, all of our customers have assets that need to be managed. It's typically a fairly chaotic process. They may or may not have a software they work with. They may or may not do it with all or some of their individual assets but they're trying to figure out how to grow information to make sure that the items that individuals need to do their job are readily available and accessible for those individuals to acquire every day. we have the ability to take a part in providing that service. There's a preventative maintenance aspect of this, but there's various preventative maintenance that needs to go on, whether it has to do with a system's HVAC units, whether it has to do with changing out the lubricants within a particular device or a machine or you think about forklift, whether it has to do with their pneumatic tools or electric tools. There's a wide variety of maintenance work. So when you think about -- I just talked about asset management, that pairs up very nicely as well from a preventative maintenance standpoint. So think about how FASTCrib has the opportunity to take all of those various services that can be scattered across multiple different types of service providers, potentially in various software programs and the ability to capture that information within 1 individual system. Not only that, but one of the things that we do pretty good with is industrial services as well. I think Dan shouted out a number. I don't remember I think we had a milestone on industrial $100 million. So again, we -- so we're kind of pretty good with industrial services. So think about from a preventative maintenance standpoint, from an asset management standpoint, about how it gives us the ability to bolt on additional resources as well. So not only are we helping them be a software program to keep track of their assets, to keep track of their maintenance programs. But oh, by the way, how much you give that business to Fastenal. We can do your tool repair. We can do your cut or regrind. We can do your instrument certifications and repairs. So there's a lot of opportunities for us when it comes to preventative maintenance. So FASTCrib, it's creating that opportunity for us to stack our various services on top of each other. So I purchased my power tool from Fastenal, fantastic opportunity I also put that tool inside of the software. So I know when I bought it, I know what my warranty information is. I know if there's any preventive maintenance programs around a fantastic, opportunity for a service. Oh, you want to control that part and the access to it, fantastic. We have a vending program. Would you like to participate in that as well? Oh, you need to have that preventative maintenance done now? We have industrial services that can do that as well. So if you think about it in terms of addressing the total addressable market share and expanding our capabilities, we are stacking multiple items that provide us for an opportunity to go back to a customer and say, how about you let us provide you with those services. And then that we have the opportunity to create revenue, revenue streams based upon those individual services. So the FASTCrib program is becoming a tool in our toolbox, which enhances our ability to perform those supply chain services, all while leveraging that core competency that's being performed locally by a lot of our Fastenal managed inventory activities today. And it's also giving us that opportunity to create new revenue streams around services and software opportunities that exist out there, all while enhancing that customer-centric focus where we're continuing to provide more and more services and become more and more of a trusted partner with our individual customer base. So you'll continue to see us build off of these strengths, their strong efforts to bring our FMI program to maturity. So think about how the importance of continuing to be seen as that trusted partner and making sure that we've deployed all of the technology that we need to deploy to collect the data that we need to collect around the Fastenal managed inventory and how that turns into an experience for our customer base around those data-driven decision making, the stuff that Kevin talked about and the richness of that data. And then that leads into more and more of those conversations of gosh, we really love the quality of program from an overall perspective in terms of what you do, what you provide, the data and the analytics and the decision-making and how easy it is to work with Fastenal, I love that. Can you do all of this other stuff, too? FASTCrib offers us as a software program that mechanism to say yes. So when we think about that environment today where we have a couple of hundred customers who've been great partners with us and has helped us learn over the years. We assume that as we move throughout 2026, we'll probably see that at least double in terms of size. And by the time we get through 2027, we believe there's an opportunity for that program to be tenfold from what it is today. And that's just the starting ground for us. If you think about the number of services and what different organizations should do, the number of various organizations that we're partnered with, both big and small, there's definitely an opportunity for us to build this program into something that has the opportunity to be north of tens of thousands of programs that exist out there today. So with that, I will turn the floor over to Christine, and she's going to share some additional insights around our digital solutions.

Hello, and good afternoon. My name is Christine Molling, and I'm honored to be here as the Vice President of Digital Solutions. As many of you know, our digital solutions is a comprehensive suite that is our Fastenal managed inventory solutions and technologies, coupled -- I will, I will. I'm coming, hey, I'm coming. Our Digital Solution -- threw me off a little bit, no. Our digital solutions is a comprehensive suite that encompasses both our Fastenal managed inventory solutions as well as our eBusiness capabilities. my area of responsibility is on our eBusiness side of the suite. So a little bit about me. I assumed this position last year, and I bring with me years of knowledge on our eBusiness program. where I've been very integral in the capabilities that we offer within our eBusiness program. I will celebrate 25 years in Fastenal in May of this year. In the last 15 years, I spearheaded the technical road map for our eBusiness program. This experience has really equipped me with the insights and expertise needed to drive our digital solutions forward. One of the most significant impacts that I've had within my career at Fastenal was in 2007, when I transitioned out of IT and helped to launch our industrial vending program. Collaborating with 3 other key individuals, we built that program from the bottom up. And now that program contributes to over 25% of our revenue at Fastenal. All right. So in 2024, our eBusiness program supported over $2.2 billion in revenue with Fastenal. The success of this program is largely attributed to our eBusiness partnerships. These are e-procurement partnerships, excuse me, these e-procurement partners include integrations with our customers, where we deploy technology using EDI various versions of XML as well as our punchout catalogs. So that was 76% of our revenue in our eBusiness program. The other 24% of our revenue comes from our eCommerce web verticals being Fastenal.com and fastenal.ca. When we analyze the customer segmentation that makes up this revenue you'll see that the majority of it comes from our contract customers, comprising of over 83% of that -- or that customer base. This really should come as no surprise to anybody in this team when you heard all of the speakers speak about our commitment to nurturing and growing our contract customers. And within our eBusiness program, we also have a dedicated team that is responsible for driving the adoption and participation of all eBusiness initiatives that we put into our e-procurement partnerships. The other remaining customer segmentation comes from our local noncontract customers. This is really more of our small to medium-sized customers. And while we are obsessed with coring into our contract customer base, it is important to note that all of the efforts that we put into that customer segmentation does roll down and help the smaller- to medium-sized customers as well. And that really kind of speaks to the drive to growth with customer service within Fastenal and really helps us sustain profitable growth moving forward. All right. So now as we talk about our eBusiness vision and strategy, it's really no different than what you've heard throughout the day. Really, what we are here to do and what we want to position Fastenal is a strategic comprehensive supply chain partner for our customers. And we want to do that through delivering innovative, digital solutions that cater to their needs. So if you look through our history, we have historically prioritized coring in our technologies into our Fastenal managed inventory solutions. And as a byproduct of that, that means our eBusiness solutions haven't been quite as strong. Now we understand, however, though, that in order to be that comprehensive supply chain partner for our customers, we have to cater not just to our customers manage spend, but we need to have the same rigor and robust solutions and services that cater to their plan to not manage as well as the spot by arena. And by creating these comprehensive solutions tailored to all aspects of our customer supply chain, we will continue to optimize not just their supply chain, but ours as well. The real magic of Fastenal, and Holden opened the day with this, is the real magic of Fastenal is the synergy of all of our solutions. It's not really picking one solution over the other or one solution being superior to the other. It is the -- the magic really comes in when we combine all those solutions into one where we provide a customer experience that is robust and best-in-class. And we are going to -- we will achieve these by ensuring that we have a service model that aligns to all of the specific needs of our customers. The customer experience will be enhanced by providing the deep insights that Jeff and Kevin talked about, where we can provide them analytics that will allow them to make data-driven decisions within their own businesses. And this will be accomplished by ensuring that we have that cross-functional expertise and by aligning our enterprise goals and strategic priorities that, again, we've been talking about throughout the day. We measure success in Fastenal and I think it's really evident through these dialogue and conversations by data as we continue to roll out more and more solutions and services within the eBusiness program. We are going to continue to enhance the data that we continue to collect in our environment. And that's going to allow us to make sure that we are investing in the right resources and technology to position Fastenal to be a comprehensive supply chain partner. Our commitment to leveraging cutting-edge technology and delivering unparalleled value to our customers is what remains unwavering. By aligning our strategic priorities with our enterprise goals, we ensure that we are meeting the needs of our customers and ultimately driving success for both our customers as well as Fastenal. All right. So in today's fast-paced digital world, customers expect more than just a transactional experience. They are -- they seek out partners who are going to provide value beyond the initial purchase. And that's all we are committed to enhancing the key functions of our eBusiness platforms and coupling them with the digital front door that will seamlessly integrate all of the other solutions we offer. This integration is complemented even further by the local personalized service that our customers have come to expect from our local Fastenal representatives. While we acknowledge that our eBusiness program maybe isn't quite yet exceptional. We do know that we have built a solid foundation that is robust and reliable. And by focusing on removing the friction within these core areas, we ensure that our customers are going to receive a smooth and efficient experience. Our investment in technology is not about just convenience. It is about delivering and creating a strategic advantage. By offering a comprehensive digital solution, we position ourselves as a key player in the supply chain arena, capable of meeting the ever-evolving changes and needs of our customers. This approach not only drives customer loyalty, but it also contributes significantly to our long-term growth and profitability. Our commitment to innovation and customer centricity ensures that we remain at the forefront of the industry, delivering unparalleled value to our customers and stakeholders. To say I'm nervous is an understatement. So how do we define success? The success of our digital solutions strategy is multifaceted. First and foremost, it will be measured by our ability to provide comprehensive solutions that meet all of our customers' supply chain needs. Our value proposition lies in leveraging that deep robust data that we collect to align our -- the products that our customers need with the services and solutions that we offer. This means using data to transition items that are currently in a spot by scenario into a Fastenal managed inventory solution. And vice versa, if that data shows that the item doesn't make sense in a Fastenal managed inventory solution we will move it into something that makes more sense for both Fastenal as well as our customer. By providing this guidance across our customer supply chains, we are able to reduce the total cost of ownership for our for our customers and increase supply chain efficiencies. And for Fastenal, this strategy ensures that we position ourselves as a strategic partner, deepening our relationships with the existing customers we have and exploring new opportunities with the same customers as well as new verticals. By doing so, we can deliver growth and diversify our revenue streams. This strategic approach not only strengthens our market position, but it also ensures for long-term sustainability. For our stakeholders, this strategy widens our competitive advantage and increases our total addressable market. By continuing to innovate and adapt to the ever evolving needs of our customers, we ensure that we remain at the forefront of the industry. and our commitment to using data-driven insights to optimize our offerings and streamline our operations, transitions into tangible benefits to our shareholders. including enhanced profitability and sustained growth. In summary, our digital solutions strategy is designed to deliver value on multiple fronts, providing comprehensive solutions for our customers, positioning Fastenal as a strategic partner for our customers and driving growth and competitive advantage for our shareholders. This holistic approach ensures that we're well equipped to meet the challenges of the future and continually delivering exceptional value to all of our stakeholders. So now I'm going to hand it over to John and Vic and they're going to talk about how AI is helping organizations navigate to the future. Thank you.

My name is John Soderberg. We're going -- if I start coughing, I apologize. I'm 5 days beyond my symptoms, except the cough. But what I'm going to do today is just quickly introduce myself. I started with Fastenal 31 years ago, part-time student at Elan University and worked in the field for approximately 20 years, and I've been in Winona now for the last, yes. I'm doing that through -- can you hear me, okay? Yes. Okay. And so -- I lost my train of thought there. Yes. So I worked in the field for 20 years, and I've been in our home office in Winona for the past 13. I started leading the IT team 8 years ago. And today, I leave the global talented team of technologists as well as IT leaders again, all over the universe as well as our digital-facing customer teams. Today, I'd like to introduce to you, Vic Miles. I've asked Vic to present with us, and Vic's going to share some things with you about what Microsoft is doing with partners to work with AI in a responsible way and put it to work. Investments that Microsoft's made in addition to investments that we're continuing to make. So I'll let Vic take it from here, and then I'll cover some use cases with you.

Thank you, John. All right. So we -- again, as John said, my name is Vic Miles. I'm with Microsoft. I've been with the company for 15 years. I'm a General Manager in the business, and I look after our retail and consumer goods business across the Americas, North and South. And I have a team that focuses on our strategic partnerships the companies, brands that you would know, Walmart, Kroger, Home Depot on the retail the Procter & Gamble, Kraft, Mondelez on the CPG side. And so we look for companies who are moving forward and driving who are pushing us. So we like companies like Fastenal, who will challenge us to be better than we are. my background in the business. I spent 10 years at Walmart stores, I'm still based in Bentonville, Arkansas. And I was in the company during the heavy expansion time and so it was a great place to grow up and I get that same feeling being here with Fastenal. I really, really do. The folks when you talk to Walmart leaders back in the day, they had command and control of the business. I mean, there hasn't been a question that these folks can't answer, right? I'm super impressed and I have been, John and I got acquainted about, I guess, 15, 16 months ago, and I'm going to try not to sound like too much of a Fastenal fan boy, but I'm really excited about what's going on at Winona, something in the water. And so when I talk about today our AI approach, it really is grounded in 3 pillars. The first is meaningful innovation. And so inside the company, right, we have Microsoft Research. We've got folks doing really heavy and deep work across the globe. So we want anything that comes out to market to be meaningful, right? And meaningful really equates to available and accessible. It's 1 of the reasons that we went out to our being our search engine with our first deployment of AI, and we released it to hundreds of millions of people at once, right? And so that's available. The second is empowering people right? Our mission is to empower every organization and person on the planet to achieve more. And you've got -- you can't do that by taking the human out of the loop. So we really believe strongly that to empower people, we want to augment the human capacity and not replace it, right? And I'll talk you through sort of the evolution of our thinking here. And then finally, responsible AI. And there are -- there's probably 2 things that can slow down a project in Microsoft and sort of overrule even our CEO, Satya. And one is privacy and security. And the other is accountability and fairness. We want to make sure that the communities that we serve, including the communities that our customers serve can count on our AI, right? And if you want to -- if you're an analyst in thinking about this company and how sort of it's positioned for the future, I would ask you to count the number of times they said data today. right? And in tech, we believe that data is currency, right? And so because it's currency, you're going to -- you should expect more regulation, not less as AI moves forward. So the push to profitability for AI and all things that surround it has got to be sort of tempered a bit with what the regulation that we think will come. And so we have a blog post that we outline our position on responsible AI. And so we make sure that every engagement, we start with that. So I'll take you through a bit of our evolution, and we'll end up in sort of the autonomous AI here towards the end. I've got you for about 15 minutes. I might go along if Dan doesn't mind. So Copilot, right? So you've all heard of Copilot, you can't talk to Microsoft, you read any content of ours without hearing about copilots. We, again, keeping that human in the loo we believe moving employees and users from tools to creative assistance, right? So instead of just using a tool, when we think about our flagship product, Microsoft Office. Word is not just a word processor. It's now your copy editor, right? So Excel is not something that you're grinded on a formula. It's your research analyst, right? It can start to answer questions. I think who was it that said, our customers want the answers, right? They think they want the data, but they really want the answers. When you show them the power of what can be done. And John and I -- you and I were in the field, and he started talking to some folks in the field about what was coming. And these folks were visibly moved. They said, you're going to actually change my life. I'm going to go home and tell my wife about this. I'm not working over time anymore, right? When you give me these tools to allow me to do spot bids and grow my business, you're going to change my life. When is the next question they ask, right? Moving from data input, right, to data output, unless you're a data input analyst, maybe a call center tech or something we're just inputting data, we want the system right? We've had innovations across the board of technology that can really just now just give you answers, right? The data is all there. Most of it's digitized and start to give you answers, and we'll talk about that a little bit. Following commands, moving from following commands to providing recommendations within context. And this is the key part that Kevin covered, right? If you take nothing else away, this group of leaders is working on a -- and more than working on because there's a lot of people working on master data management and data governance. I don't know of another company in my space in all of the Americas retail and consumer goods that has a handle on their data governance like Fastenal does. That's -- you can take -- I could stop here and say that's why I'm here today is they are actually pushing us at Microsoft to be better, right? We're in the process of embedding their strategy and their needs into our engineering strategy, right? We want to move as fast as they're moving as fast as the strategy. And so this keeping the human in the loop and providing recommendations to augment the human capacity is really what's going to change the game for really all in this entire market. right? And so then you say, well, if it's going to be available to everybody and ubiquitous and democratized, what makes Fastenal different, right? We all have to ask that question. I think it's being first mover advantage. First mover advantage is what you're hearing, I think, today. Finally, the unlock, right? So AI, how do you -- how -- what was the breakthrough -- the breakthrough was in this last one using -- moving from using specialized language, what I like to call machine speak, right, to natural language. Just speak to it as you would your colleague, right, talk to the Copilot as you would your colleague. And it kind of gives us technologist shivers when we say, hold on, my whole job is turning business needs into machine speak, right? We call it programming, software engineering, all the rest. And so we're going to all have to figure out how to do something different. I don't know if you saw the quote from Marc Benioff, the Salesforce CEO, who said, "I'm done hiring software engineers for the foreseeable future." The GitHub Copilot has offered me 35% productivity increase on all my developers, close all the recs. I'm not hiring developers until my business grows past this month that I just got. That's huge. Again, especially if you're a technologist like me and count on it to pay your bills and send your kids' college kind of thing. So this is the unlock, right? If you say, when did it change? John, you and I did talk similar to this sometime last year, and we started in the 1950s, and we said here's where AI has come from. And now we're starting here. This is the real change. And sort of to demystify it for you from a technology point of view, AI has 2 core components. It has a natural language interface. We acquired a company called Nuance that really leapfrogged our ability to turn words, language into information that the system could use, right? And we were always able to do some language in very simple queries. Nuance really changed the game for us. And then a reasoning engine, right? We built on top of OpenAI, right? And we're extending their capability, and we brought our hyperscale -- global hyperscale capability to bear. And then when you add NVIDIA to be able to then access that mass amount of data, right, that mass amount of data, that's where we hit the hockey stick, right? And the story is not yet told, but we're all pretty excited about the upward trend and where we are, and it's a fast-paced world. I'm going to cover with you in 20 minutes sort of the last 2 years of development. It's moving about that fast. Every day we wake up -- just this morning, I saw Google had announced a robotics model, right, to get to robotics process automation, right? And it's just moving so fast. And so these are the big building blocks. Again, the data behind the reasoning engine is really the difference that you see. If you want to sort of test the theory and you're looking at competitors, ask them, do they have a digital twin of their business, right? I think it was Jeff that was talking about we don't stop at the back -- we don't stop at the dock. We actually know the consumption inside the manufacturing plant. We actually know which machines inside the manufacturing plants by project codes and all the rest are consuming these parts. That's effectively a digital twin, right? If you go to Dallas Fort Worth Airport, which from Bentonville, you don't fly direct many places, but Dallas is one of those places that you can get to. But Dallas-Fort Worth is like a little city. And I worked with a company that built a digital twin of the Dallas Fort Worth Airport. They can see -- and it's sort of meaningful or relevant. They can see baggage handlers and input queues and TSA and planes pulling back from the dock and all that on one screen, right? And that's the power that I see through what that we talked about today with data, is you can actually start to anticipate and model based on the data that is -- that Fastenal has. Next. So we kept human in the loop, Copilot. Next is generative AI, right? And if I can sort of just define generative very simply for you, generative really, I translate to something from nothing, right? So you ask the machine for an answer, and it creates a net new answer. Now the hard part for us, technologists, is making sure that's a somewhat consistent net new answer. You might have heard of this phenomenon we call hallucination, where the machine will make up answers, right? Change a word in the prompt, you get a different answer. And you're like, hold on. That didn't happen in 1943. And it says, oh, sorry, right? And that's one of the things that we're working on in terms of what is throttling our ability, the whole ecosystem's ability to move this forward, things like that. Really small but very significant things like a hallucination in the business. But generative AI is the next wave, and we're making investments in these 4 capabilities. The first one, content generation, right? So if you're a copy editor, if you are in marketing, there's huge marketing solutions here. We have a case study right now with CarMax, where they were challenged with writing copy for individual vehicles, right? It's a Ford F-150 red with a scratch down the side, right? That write-up looks different than the green F-150 on a different lot. And they said that it took them weeks to get all of the various information in from all of the different departments to be able to publish that. Well, you're sitting on inventory for weeks. They turn that into hours, right? And they're saying this changes our business. That's the kind of thing that we really see in the business. Next is summarization, right? In the manufacturing space, Dan talked about tariffs and that. But what about individual components that are raw materials, right? This one sort of component, selenium or some derivative is now -- is found to be toxic, and we need to take it out of the supply chain. What does that do to my supply chain, right? You can go talk to your risk management folks and wait 2 months, right? Well, they figure out, well, how bad is it and all the rest and who can supply it. Or you can let AI reason over that data and say, here's an alternative. Here's an alternative raw material. Here's an alternative product that uses that raw material that might replace it in your business. Imagine when you do that for a customer, they say, yes, they will pay for that service. They're talking about selling the data. They will pay for your insights and service. So summarization, if you do contracts, you guys are financial, when the regs change, cancel the weekend. We're going to be spending the weekend pouring through this 172-page document. Let AI do it for you. Code generation. I already sort of told you about the shivers that technologists are having in terms of being able to create programs, applications, the things we've been talking about today from spoken language. And really, as we get into the next topic, you'll see that machines can start to talk to each other. It's a pretty heavy topic, but they can really start to talk to each other. We were at a conference we call Build, our technology conference for technologists. And we were doing a demo on stage. And we started up this demo that showed the machine that was supposed to act autonomously, and it didn't finish running. Like the demo sort of failed, and that's what happens when you do live demos. And then a few minutes later -- about 90 seconds later, right, which is an eternity when you're standing on stage waiting for your demo to finish, right? And our technician, he looked at me. And he said, oh, the machine was disagreeing. They were arguing about what the right answer was, right? They both had intelligence and said, I think this is the answer. Well, based on this data, I think this is the answer. And they were getting to it, and it was fascinating. Semantic search. I think, John, you're going to cover a little bit about that, how Fastenal is taking the context-aware nature. Again, I told you digital twin and data governance, master data management, knowing who owns the data, who should have access to the data, where does the data come from and then the levels of the organization so that when Dan asked a question, he gets as much information as he wants global. When a district manager asked for information, they get information about their district, right? No more, no less, right? You don't want your frontline person being able to find profitability and perhaps sharing that with your customer or something like that. So those are the capabilities. Next, agentic. We're doing good on time, John. Agentic, this is the tip of the spear or the edge of the blade where we're at today. And you most undoubtedly have heard about agentic AI. And the definition is in the name. It's agents. And the best way I can describe an agent is an agent works on a unit of work. And a unit of work is a full set in any value chain. Imagine if you are in accounting and you need to pay an invoice and you need to understand what was ordered from procurement, what was received in the back room, were there any discrepancies before you go pay the invoice. And any sort of hiccups in that require discussions, e-mails, spreadsheet sending between 3 different departments. But realistically, from a system standpoint, that's one unit of work, right? We can have an agent developed that does that without the e-mails, right? And perhaps now you only get the 3% of things that didn't match the rules that we use to resolve these things. If you and I grew up in retail, if you -- when you have an out-of-stock, right -- and your business is no different, right? When you have an out-of-stock on a side counter in a store or even in a warehouse, a person who manages that, who's got 18, 20 years in the business, like most of the Fastenal folks do, they can answer that in minutes, right? Oh, let's check the inbound. Let's shift it from a different warehouse. Let's do this. Let's do that. With a person with 2 years in the business, right, that's an afternoon, right? That's an afternoon. How would I shift a truck from one DC to another? I don't know. Go ask so and so, right? 4 hours later, you have a solution. That's where AI comes to. And that's really -- and the reason I mentioned that here is agentic is -- for the first time, business leaders are starting to say out loud, I actually do want to displace people. If you can manage that whole unit of work, I actually do want to displace people, right? But hold on. There's more, right? Not to actually lay people off, fire people, that sort of thing. But I want to grow my business without growing my cost, right? I want to grow my business without growing my cost. And John, when you and I were out in the field -- and John is pretty good. He's a very unique CIO in the business, in the community of CIOs in that he gets the business really, really, really well. And so in a car ride and discussions over lunch, I feel like I understand it. And then we -- and I think you're going to take a tour this afternoon, right? That's probably -- that's the icing on the cake. And I get there, and we're walking through. And we're seeing the process that happens, and we're asking questions. And then Dennis, I think his name was, he started saying the kinds of things he could do with a system like this, right? And I looked at John and I said, I see where the secret sauce. Somebody stole my word earlier, a couple of somebody. I see where the secret sauce is. And if you're taking notes, you can compare. It's the people. It is absolutely the people. But how do you build an 18-year employee like Dennis if you want to grow your on-site business, right? You're going to have to overhire, right? You're going to have to overpay, number one. You're going to have to poach and all sorts of things. Or you put your strategy to use and say, I actually want a 2-year associate to be able to do what Dennis does in the next customer, right? So that's -- you want to say, why is Microsoft here at the Fastenal? That's why. That's why. Because when Kevin's data strategy starts to bump up against -- he mentioned a product earlier. I don't know if you caught it. It was Fabric. Fabric is the hottest thing at Microsoft, right, right now, right? When he said it, I got little chills. Go, Kevin, go. When he says, hey, I have a challenge, I have my long tail item catalog that lives in a database that's not Microsoft, that's about 13 years old, right? And it's got additional data that's actually in PDFs, right, that give me all the information about the products. But I still want this capability. We have to go back and say that's pushing the limits of what we can do. Let us come back to you with an answer. Let us come back to you with an answer. I made that up by the way. And so agentic, I sort of -- I'm starting it simple and saying it's just simple retrieval. You have a unit of work that is tell me who -- which employees start today, right? And there's all kinds of HR things you might have to do. Just because they accepted doesn't mean they'll start today. Have they been enrolled in orientation and all this? That's an agentic retrieval. Or you could send the e-mail, get the spreadsheet, offload the employee IDs, put it into a different system, task for all the employees that started today in our company, initiate the new employee protocol, order their machine, create the orientation schedule, send out the welcome letter, all just from an agent. You don't have to get 6 people involved to onboard a new employee. And then finally, autonomous, right? So this is sort of the mind-bending one that says we -- you could create an agent that has the express sort of goal of meeting our SLA with a customer to save them X percent on the business that we do with them, right? And I don't have to kick the agent off each night. The agent is watching the entire ecosystem of Fastenal, right, both new items coming on board, new customers. If there's a surge in a particular item, hey, what's going on with that item, right? Maybe it's a new -- maybe it's a better, more efficient cost for a soft mat for a technician to stand on, right? But it's changing the game for manufacturers, and people are ordering it. Well, let's go offer that to the 60% of customers who don't even know about it yet. And then again, it's autonomous. We talked about it. Somebody had a question, will you keep the human in the loop? Does somebody have to approve that, right? That's a business decision, as we like to say in technology, which means my hands are tied. You have to make the decision. And so I would say that if you've ever shopped on Amazon and you've looked at an item, right, somebody sent you a link and you looked at an item and it said, hey, there's a newer item, there's a newer version of this, right, the autonomous agent could just go straight to the customer and say, here's your -- here are 15 items that you purchased today. Here's a more cost-effective route. Here is all the information they need about lead times and all of that, right? And then let the customer accept. So now the human is not even in the loop. And so this, again, is the bleeding edge of where AI is. Your data -- I'll say it again. Your data has to be pristine to be able to do something like this, to offer a customer terms on a product with no human in the loop and then actually execute the transaction so that they start getting that item. And so this sort of concludes my remarks. I know, John, you're going to sort of unpack this a bit. But I want to thank the Fastenal team for inviting me to be here. It's -- and again, I was trying not to be a Fastenal fanboy, but I'm really excited about what's happening. We -- Microsoft is excited. Our company is looking to customers like this. And again, North and South America, we've got -- if you -- I don't know if you can keep up with the retail tech, but Canadian Tire in Canada is doing what we call conversational commerce, where if somebody wants to come in and they want to get fitted for a tire, what kind of car do you have? Let me give you the options, and there's an agent or a Copilot, a chatbot that gives you that. Tractor Supply in the U.S. is doing it. They've got a Hey GURA app, right? Much like your Blue app, they've got Hey GURA app that lets them sell feed and all sorts of equipment to manage livestocks. Again, getting that person who just started 4 weeks ago to be able to talk to a farmer, right? And the farmer is like, give me somebody who knows what they're talking about, right? Because they're mentioning the tech specs in that. And so when I think about, again, what's going on at Fastenal, we're super excited about the possibilities, and we're glad that they're challenging us. So thank you once again.

Thank you, Vic. Appreciate that. I'll refer back to a couple of things on this slide as I step through some use cases that we're doing. I don't want to repeat a lot of things that have been said today, so I'll say to you quickly. The foundation that the team has built is what allows us to do what we do because without quality data, this -- none of this stuff works, okay? So we've really focused in on 3 areas, and some of the dialogue has already gone to pieces of it today. And really, the first one is leveraging our FMI data. One thing I'll say before I jump into this -- well, I'll save it. Donnalee covered the Blue Team. Jeff covered a lot on FMI. Donnalee covered Blue, which is our AI-assisted sourcing tool. Actually, it's our knowledge management where someone can interact with an industrial assistant and then really this product landscape that we've coined, what is it, what else is it and where is it. And that really is our internal AI-assisted tool that is operating today. And so as I step into the first one, and I'm just going to explain to you some of the things that we're doing in this area, is that we're not just a fulfillment company. I think it's very important to remind everyone of that. We are very much a supply chain organization. So global sourcing, products moving throughout the world and how we track those things, we run our supply chain. The majority of our weight moves on our trucks. And that can't be lost in this conversation. We haven't talked a lot about that. What that puts us in a position to do is manage our customer supply chain. So when we're looking at our customer supply chain, a lot of conversation over the years about the last mile, we've got the last mile down. And Casey talked about it the last 30 minutes. Draz talked about that. But it's really about that point of use, what Jeff talked about, and capturing that information. And so the investments we made, we obviously doubled down in FMI. You've got a button on your desk in front of you. There's pushers, connectors, scales, LiDAR, RFID, infrared, BLE. Could wear you out with all the different chirping pieces, right? But they're telling us things about products and inventory. They're answering questions around who, what, where, when and even why, okay? So it depends on how much containment you want around that product, but we've got very flexible solutions that capture that information. That -- those products are around the products that we manage. And I don't -- you hear a lot of people in the industry talking about planned and unplanned. What I know is what we're responsible for and what we manage and then what we respond to that we sell customers that we don't manage. So I tend to put it in 2 buckets. We're responsible for these parts. And when we're responsible for them, people want comfort within the risk of that supply chain, but they're not often asking us where they're at. They want to know there's depth of supply chain there. If we're not managing that part, we're bringing views to that customer to help them make better decisions around what we maybe should be managing for them. In turn, those customers come to us and talk to us about items they like us to manage for them. And that's what Jeff was getting into with FASTCrib. So that's the kind of the stage that I'm going to set for you. One of the first use cases that we drove into -- and the cases I'm going to talk to you about today, elements are in -- this one has elements in working application. The other 2 are active products that are growing, just so we stay in our language, okay? So the first one is FMI. There's 3 things that we're always looking at within FMI. And today, we're using machine learning, some elements of AI. We're even using some agentic AI within this tool or tools, I'll say. And really what that is, is we want to look at a machine and understand how we service it. And Jeff and team have really just focused in on the vending portion of this right now, 115,000-plus devices out there. And if you look at a machine in isolation, some of the questions that were asked earlier, they're good questions. Like there's a real estate footprint. There's a planogram there. There's parts assigned to a planogram. There's movement. We know what we service it. We know who took what, and there's a whole set of rules around that environment. The question is, servicing that machine, are we doing it effectively? So are we servicing it 2 days a week, 3, 5 days a week, 2, 3 shifts a day? And we can look at that in isolation. What we've really been using AI for and to expand that view is what about the 312 machines at this customer site because we kind of look -- Jeff said it well. It starts with the planogram. That planogram is tied to a location. That location might be tied to a third level, we'll say, department. It might be -- but it's tied to a physical site, okay? So the reporting that Dan and Holden passed out earlier, those bucket views, those are site views. So now you can start to peel back the type of insights that we're starting to get. And so if I want to look at a service model, I can look at any one of those 3 levels, which are the primary levels. And so what AI is doing is it's making recommendations for us. And as Kevin said, Vic reinforced and Jeff continues to say, it's -- people don't really want reports. Let's be honest. I don't want to go look to a report to gain insights and draw my own conclusion. Sometimes I do. But most of the time, I want to interact with data, and that's the natural language piece within interacting with it. So if I want to go into my site and look at it perhaps through something like FAST 360 down the road, I want to say, when was Fastenal service date? When was this machine last serviced? What are my opportunities for adjusting my min-maxs? Because when we look at service schedules, it's really just about part and footprint because what we find sometimes is we might be overservicing 3 parts within a whole machine, okay? We want to bring that forward to a customer, and we want to work with them to make sure. Are we really just -- do we need to expand a single part footprint? Is it a critical part that's not moving? And so that kind of information brings about great conversations with customers about challenging how we manage things. And we're in a very strong position because we have various ways to manage parts, many different ways, and they all have different cost scales, as you might imagine. So the first part is service. Service and the frequency of service can drive the footprint of the planogram. That's the first part. The second one is I want to optimize the machine. Some of that's based on service, like I just explained. But if I want to look at my machine and look at the parts that are sitting in that machine and really understand how I can perhaps better service that location or that physical site, that's where we're using AI today to look at it and just say, if you make these changes, you get these results. We're not making those changes without conversations with customers, okay? And today, as I said, these are working models in the FMI piece that we're evaluating. We're just running like very similar to what Vic said. It's really about looking at almost like a digital twin. Here are scenarios. Here how they play out. The third piece of this is really product rationalization. Ryan asked earlier about contracts. What else can we see out of your contracts? Or what types of things are happening? And Bill and Jeff both said, I think Kevin expressed as well, that some customers come to us and say, don't sell me 150 different types of gloves. Well, who's in a better position for a global company to bring back the view to them as to what they're buying from us? So those 100 gloves could be 6. They could be 8. When you rationalize that, we're really helping our customers achieve their goals to drive down perhaps the cost of a product to leverage with a brand partner supplier and to reduce the risk of supply chain because part of part rationalization is this customer is very tied to this part and this brand, but it's a higher at-risk supply chain because of the lead times associated with that manufacturer and where they may be at in the world. We can bring forward more of a view around the risk around that part, okay? So that, right now, is what we're really focused on. When you start talking about agentics and you think about what Donnalee described earlier as Blue, one key to the retrieval portion of agentic AI is that it's based on grounded data. That means trusted data. And so Donnalee's team, whether it's the content or Kevin's team with the data, that's heavily curated and updated and monitored to make sure that we're putting in front of our customers good things or good content really in front of our employees. With Blue, Blue, to me, and Vic had said it earlier, is really that retrieval component because I want to interact with it. I want the AI to respond to me, but I want it to be coming from trusted information that's really aligned with our culture, our values and the processes and things that we do. Casey talked about -- a lot about role, looking at roles and what responsibilities are. We can then model our data and our content around those roles. That's why it's so powerful. I'm not going to spend a lot of time on our industrial assistant, Blue. What I'll tell you is that we've got 16,000, 17,000 employees every day, eyeball to eyeball, standing in front of customers. And we want to empower the person closest to the customer with the most information to make the best decision, whether that's informing the customer of choices or helping them with a solution. That's really what Blue helps us do, and that's an internal-facing application today, okay? The next and final one that I'm going to spend some time on, this one I get really excited about, is the -- what I call AI-assisted sourcing. And it's the what is it, what else is it, where is it. What is it? Supply chain -- purchasing teams continue to shrink demand on a lot of manufacturing. People are looking for things. They can hold it. They can look at it. And what I want you to imagine is a customer can send us a print. They can send us handwriting. They can send us an image. They can send us a spreadsheet with thousands of parts on it. And we can digest that, whatever format they're sending it to us in, and run that against our product offering within our product information management and bring back hit rates based on match rates, okay? Because a lot of -- Christine covered e-commerce. And a lot of employees and a lot of customers go to e-comm, and they're doing searches millions of times a day. But keep in mind, there's millions of those things happening a week face-to-face with our customers. And so when you say what is it that product, that's a common question. The confusion many times comes because there's so many different options. What else is it, right? So what we've built is the ability to identify and match parts, which sounds like a semantic search or a search engine, but it's better than that. It brings back more context. And then within that, if I select one of these parts, we rationalize what else is it. It's this glove, but it could be these gloves. It's this hammer, but it could be in this family of hammers. And once an employee selects that, we show them in the supply chain. Keep in mind, with an employee, I know who they are, where they are in the supply chain around them. And the depth of that supply chain is their local inventory. It's their regional servicing distribution center. It's also the -- it's company-wide inventory in addition to all of our vendor inventory where we've done our integrations with. And so they can make a very good quick decision about that part in the supply chain and respond back to the customer because that's -- when you get into the what else is it, customers and employees want the option of what's going to solve the problem the fastest. If it's managed, this doesn't come up that much unless you're quoting new business. If it's OEM, there's a lot of detail around the parts that you have to look at. If you're reacting to a request, it's typically an unplanned request or somebody ran out, they want options. What else is it? We're able to provide that. And the last piece is the supply chain piece. So if I'm an individual coming in and I want to interact and learn about a product, that's more of what I would say is Blue. If I want to nail down what the product is and understand the supply chain, that's AI-assisted sourcing. What Vic started advancing into is really the AI -- the agentic AI, and that is your -- it's really your ability to understand what the product is that you're looking for. And that's the retrieval component, and we have that operational today. But really what it comes down to second within agentic, it's task driven. And after it's task and your decision trees or matrix are doing what you expect them to do, it's really about autonomous. I can tell you, and we've got employees in the back, once they find the part and they want it, they want to click one button. Customers want the same thing. So we don't need to carry it through 3 systems, as Jeff described. We expect to automate those things. So what we've been able to do with some of these tools is take hours, give hours back to our employees in the quoting and sourcing process because of the data we're able to present them with. What becomes -- what we build off with that because this is very foundational AI use cases that we've built is really the ability to look at agentic and then drive that autonomously once that decision is made. So sometimes they call that assisted and unassisted. I think elements of this are assisted. And then once I make a decision as to the part, we want it to be unassisted for our employees as well as our customers. And so that's really what I wanted to cover with you today. The closing slide I want to share with you is just a view of what our employees are interacting with today. This is live product. It's not a live demo. I know better than that. So General. You pop into General. I can ask questions and interact with content that's all Fastenal curated and managed. I'm going to get a response that I trust. The second one, Power of Fastenal People. Craig, Vivek and I had the opportunity to spend time with Bob last year, Kierlin, our founder. And really, that was rich time together. But we built this around -- if you want to ask Bob a question about something you're doing in your business, sales or anything that you're encountering, you can interact with Bob and get questions to those answers. And it's really based on our values, our core values and our culture. And that's a very exciting tool, and the responses are great. And if you know Bob, when he asked the question and we went in the first time and he used it, he goes, yes, that's what I would have said. That's all I needed to hear, right? So that's been an active tool that our employees really enjoy. AI-assisted sourcing, I shared with you. And then as we grow globally, we've got employees all over the world. Jeff shared with you 2 individuals from our Mexico business unit are running different parts of Europe and Asia. That translation tool piece right there -- and all these things you can interact with in multiples of languages, dozens of languages, but the translation tool gets a ton of hits for us as well because they want to work with that with supply chain contracts, all those different things. So we've got a good tool set we put in front of our customers. We're excited about the technology. And if I did this presentation 30 days from now, it would be different, and that's kind of the speed of change right now. So thank you. Holden?

I promise this wasn't a shameless effort to get AI into our valuation. The bigger picture is what we've tried to present today is this is about the toolbox. This is about what you can do, how you drive value to your customers. And when you take that great toolbox and you put it in the hands of incredibly talented, focused people that sit at the point of the spear in the field, locally, on a global basis, it's a really effective thing to do. And so we continue to invest heavily because some of the -- I know that in some respects, people have got a little bit tired of vending because it's 15 years old, but we try to make the case that we're still innovating there, and it's FMI. We're innovating -- or we're developing and innovating our e-commerce tool to be perfectly well suited to the types of customers that value Fastenal. When I think about -- and obviously, FASTCrib becomes a software tool that, again, is going to augment our toolbox in a way that is going to get us more touches and more visibility to what our customers are doing and allow us and open up the opportunity to solve additional problems. And when we think about AI -- and I should admit. I'm a luddite. Putting AI in this thing is something that I'd be convinced to do. But the reality is I can see the value in it. And John described some of those things. And it's going to drive real practical applications in our business. And Dan had talked about before how perhaps 10 years ago, perhaps Fastenal wasn't necessarily thought of as being the most forward-looking on technology. One, that really has changed. I think the work that's been done in the last decade has closed whatever perceived gap that there might have been. But what really excites us is being at the ground level of where -- of being able to deploy AI to augment the tools that we have in our toolbox. And I think that we can do great things with that. And so it's about the toolbox. And so I also like -- I have to say that between Vic and John, they mentioned each and every speaker in this presentation today. And what that really gets to is the potential that this type of technology has to augment the capabilities of everything that we do. And that's what we're exploring. And so I wanted the group to sort of understand that. We do have time for questions for this group. And so we'll turn it over to that.

Ryan Merkel, William Blair. You're making a strong case as to why data is going to be very powerful and is going to be a big competitive advantage. I'm curious, are there any other innovations or ways that you could collect data besides vending and besides maybe FMI?

Yes. Is this on? Can you hear me? Absolutely. I think what we're doing within FMI is obviously -- I've explained that I won't go into that. But when you -- Christine mentioned it, that when you start looking at a customer coming in and shared earlier our customer master data management, how that customer is interacting within a crib around FASTCrib on items that they're buying, whether they're buying them with Fastenal or from other suppliers, how that customer is interacting on our website, how that customer may be interacting in a mobile environment. So we look at the different ways that they consume different parts of our company today. But I think we're in a position today to bring that forward together in a more holistic view. And really, that's a lot of what Jeff and his team are working on, is -- that's the summary of what FAST 360 is, Ryan, is bringing that view together and making sure that as we're capturing information and presenting it to customers, we're helping them drive the value that they expect to see from Fastenal to make the decisions they make to operate their business better because ultimately, the customer is in the center of everything that we do. So whether we're innovating in our products, we're innovating in our supply chain, we're innovating within our technology, our services, and Jeff hit on the services quite a bit within FASTCrib, it's because I don't know that we've digitized and done a great job telling that story in those areas, and we need to be able to do that. And I'd be remiss if I didn't say manufacturing and industrial services because there's great opportunities for innovation within those areas.

If I could just ask a follow-up, is there any other distributors that you're aware of that are collecting the amount of data that Fastenal is collecting? Or are you in a league of your own?

I'm sure that there are distributors collecting a lot of data. And when you start talking about these channels, I don't think that any one of them is unique to any one of us. It's just our presence within those channels. And I think we have a broader presence within all the channels. And we've clearly invested heavily within FMI when others went different directions. And FMI brings forth a story. And today, it's maybe not enough time to get into it all. But when you can show somebody what's happening on the floor in their plant, they're seeing things beyond what we see. Like you're in meetings and they're saying, oh, that's the week we had the shutdown. That's why this ran. That's -- so when you start combining the valuable data that we provide them with, with what they know about their own facility, they're making better, more insightful decisions. The granularity of the data we capture, where we capture it, I'm not aware of someone else doing that.

Yes, I'll add to that. It's -- think about it's more than just the data. It's the curation of the data, right? So you can do a lot with the individual data. But think about when you're doing analytics and you start to mesh different parts of data together, and it starts to tell you different stories about things. And that's what John started to touch on. So when you think about the breadth of items that we collect data on and you can look at things like we understand where individuals are using industrial services with us but they're not using asset management but they're also understanding things about warranty repair and we're managing these items but not selling those items, well, are those product areas where we need to start to look at addressing our total addressable market? Should we be expanding into those items? No, we shouldn't be expanding into those products. It's not good for our bottom line. We should continue to service them vice versa. So it's really about the various stories that the curation of data by flipping it around different ways, looking at things like artificial intelligence, taking deeper dives than probably the human ever could, those are the things that I think really excite me about what we'll be able to do with the data from a curation standpoint to tell various stories as opposed to, yes, we got more data than anybody else.

This is Ryan Cooke from Wolfe Research. I was hoping maybe, Jeff, you could spend a little bit more time on the FASTCrib opportunity. You spoke about doubling this in 2026, 10x-ing in 2027. So is there any difference on the margin potential there as you're offering more services and software? And the 200 sites that use FASTCrib today, anything you can share on how much revenue that'd be touching?

I don't know that I'll touch on the revenue piece of it. Obviously, 200 sites, as you can imagine, from that standpoint, it's small in the scope of Fastenal as a whole, right? But we look at the various types of combination of services that can be provided. That's pretty awesome. Holden always continues to challenge us. John continues to challenge as well. You just go look at the margins in the software industry and ask yourself what you can do with that, Jeff. So that kind of excites me as well when you think about the ability to leverage and you think about the cost of developing a software program that, today, is operating across a couple of hundred units versus the exact same software program with some enhancements built into operating over 10,000. The ability to stack or bundle different types of services and to work with our customers on what's important to them, everybody has different leverage points in their businesses to what they're willing to give on versus what they're willing -- they're going to push back on and our ability to have multiple levers to work with customers on in terms of what they pay for and what they don't from a services standpoint. So I think the true gain that we'll get from it is, one, we'll be able to charge for services where today, we offer a lot of that stuff up for minuscule, right? We do services. There's -- we have procurement teams out there today. So we have teams that are doing sourcing and procuring today. We're learning a lot in terms of how to source and procure for organizations around things that Fastenal would have never dreamed of selling 10 years ago. So we're learning a lot from that, and we're learning how to charge for it and how to make sure that it fits our profit model.

I think you mentioned earlier that you weren't charging for the value, for the size and the robustness of the data lake that you have today. At what point does that have to change as you scale up the rollout of these services to more customers, particularly like when you think about the generative AI portions of your portfolio?

I'll start. I guess when I look at that, it's -- we don't sell our vending machines. We always talk about, hey, how many vending machines did you sell? We haven't sold a single one, but we did deploy a lot of them as a tool into our program. And because we introduced it as a tool, it allowed us to grow faster. It allowed us to make a better margin on the product that we had, allowed us to make money on various services. So I think there is a decision to be made out there around when are you selling the analytics as part of a service. Hey, these are suggestions of changes that can happen versus you're using those analytics to drive revenue in other areas. We're growing much faster from an industrial services standpoint because of what we've learned about asset management programs and preventative maintenance programs inside of a FASTCrib software. We're understanding how to leverage particular products within our supply chain. So I think it's twofold. We do charge from a software standpoint. So I don't know so much it's -- you consume this much data, how much we're going to charge you. That's -- I'll leave that up to the IT companies. But in terms of -- this is a program we have. You can pay this much for a program, and part of it is analytics that go along with the service. I could see that definitely being a much easier path for us to go down than trying to monetize the actual passing across of 0s and 1s.

And maybe just a follow-up on that, just to be clear.

Yes. Just let me -- I just want to add a little bit of flavor to that. Remember, there's other ways for these to value -- to benefit our business. We talked earlier with Bill and Bill and Casey about the QBR, the quarterly business review, the discussion with our customers about cost savings, what we can save them, et cetera, et cetera. If that -- we talked about, on average, over 400. We get 21.6%. You can imagine that if these sorts of tools can move that 21.6% to 22.6% or whatever the number is, and I don't know -- we don't know what that number is, but that then improves our win rate on business that we're pursuing as well. And so you may not be able to say, oh, well, we won that business because of this particular tool, but you won that business because the toolbox is able to do more to drive value to the customer supply chain challenges than anybody else can. So there's more than one way to monetize what we're talking about here.

Yes. I would just add. It's more about wrapping hidden value and how we bring back improved processes, efficiencies with customers and how we document that and put that reference within something like Fastenal 360. So the customer can see that the data was brought forward. It was actionable. They made an action, and we track those things. When you start monetizing data, how you classify data, as Vic started dancing here around regulatory requirements and things like that, that's not something I'm going to comment on today, but I'll just tell you it's a different conversation.

My question is on the e-commerce platform. It sounded like you said it's sort of a work in process maybe, I don't know, to paraphrase you. But what do you need to do to get that where you think it needs to be? And once you get there, does that become a bigger piece of the pie?

Okay. Sorry. Yes, it's a work in progress more because we have prioritized in the Fastenal managed inventory space. But -- and really the core functions and features exist. It's more about removing the friction of those core features through different technologies like AI-assisted search, making sure that the product that we have available is easy to find, it's priced right. We have a fulfillment model to make sure we get it to the customer on the expected time line and show visibility throughout that journey. So I do think -- I mean like as far as the second part of that question, which was about do we see it being a bigger piece, it's kind of back to the same answer that we've been saying throughout the day. It's a combination of the items in our toolbox that is going to allow us to get more -- capture more spend with our customers that are existing as well as new verticals that we're not in today.

This is also the case. I might just add to that where Dan has talked about it previously. This is what gets us more deeply in unplanned spend. We're a dominant player in the planned spend world. I think it's fair to say I don't think there's anybody out there that can manage in a planned fashion a global supply chain for customers like Fastenal can. But we don't get the same fair share of the unplanned surprise spend. Part of the reason is because we have a functional website that's not outstanding. And I think the purpose here is to make our functional website outstanding, which will then drive that planned spend side as well and open up markets. That's what we talk about when we talk about increasing the total addressable market. Fair?

Yes.

What are you guys doing -- I guess this is a question for John. But what are you guys doing to take the data that's coming off of your sensors? Because I think of that as more OT data and make it usable in the software, AI sort of universe.

Yes. We look at it. It illuminates the customer's floor. They can see inventory on hand. Depending on how it's being managed, they can see last time serviced. They can see quantity on hand, or they can see an approximate quantity on hand or last movement. And so really, we present that today through fastenal.com on FAST 360. But I think what I hope you're hearing from us is that we capture a lot of great information. We need to -- we need to further our story and how we present that information to our customers. And that's really what Jeff and his team and Kevin have been very focused on, is that, to your point, the data is there and we show it. They can see inventory levels, kind of here it is over here before you buy it. So when you're on our website, you're looking for parts, we're going to show you what's on hand at your site in case you're trying to check out with something that's on hand. So we're leveraging that information to help the customer make better decisions. I don't know that we've done the best job of promoting that and bringing more visibility to it. So it's really going to be about like, to Christine's point, of better presenting that in an easier fashion for the customer to see.

Is there a way to think about when you think about the overall TAM, like how could we split it into like what part of the TAM is generally planned spend versus unplanned spend? Which is a bigger percentage? And do customers -- and I had a follow-up to that, which is like when customers are making buying decisions with respect to, let's say, unplanned spend, do they have like one primary player in mind that if anything unplanned they want to buy, they'll go to vendor A, but anything planned, they'll go to vendor B? So like even if you improve the e-commerce part of your business, do you think people may or may not switch because they're just used to one platform? Or customers often try to go to multiple platforms, do price compare, et cetera?

I'll jump on that last piece real quick. Yes. So when you -- obviously, technology makes it really easy for somebody to shop, right? So that -- the Internet and the website catalogs, if somebody can open up 4 different browsers and in 30 seconds, they can price shop a variety of individuals, right? I think the -- where we look to take an advantage is the fact that if they purchase a lot of those items through competitors to Fastenal, they don't have the ability to blend that data with the data that we have managed. So especially in a customer where we have that partnership in place, where we have the relationship around various industrial services, our manufacturing division, around our Fastenal managed inventory, when they're interacting with our web, that data is intermixing with everyone else. And so when Christine talks about the ability to make recommendations on what they could do with those parts, when John talks about the ability, wait a minute, you're looking to buy this part, but it's already in your facility, did you know it, when they go to a competitor, they'll lose those capabilities. And so I would argue that they're going to want those capabilities. Much like when you get the nuances of what you can do with AI in your phone today, you don't want to let that go anymore, right? I think when we can provide that experience of blending the various data points from data service perspectives, the customer is going to want to choose Fastenal because of the fact that all that data comes together, that tells a whole story, and they don't have 10 incomplete stories out there.

Question about how big the opportunity is. I don't know that we have a concrete answer. I don't know if anybody else has an idea of that. Here's what we do know. Dan talked about the district calls that we do all year with all the district managers. And one of the things that we do in that exercise is we go through how much of the market do those districts have within their territory and how big is that market. Data is not perfect, right? You use certain databases. You make certain assumptions. But I would say that the norm is probably 5% to 6% of the market is kind of what we have. Now let's say that we're wrong by half, and we have 12% to 13% of the market. What we know is that there's an enormous amount of the market out there still to be had, both on the planned and the unplanned side, and we don't have our fair share of the unplanned side today. So what we do know is that opportunity is not our challenge, planned but particularly unplanned. There's ample of it. So we haven't spent an enormous amount of our energy trying to figure out exactly what that number looks like. But when you're inside your customers every single day and you're interacting with them in a personal way, you see what their behaviors are. You see what their actions are, and we can see what they do in certain types of products. And that's how we know that there's this very significant opportunity to pick up more of that type of business for us. But I don't know that we have a way to scale the exact size of it within what is a many billions of size market overall. Any other questions?

[ Marco Scalico ] from Walter Scott. I think Vic mentioned that the aspiration is that to grow -- to keep employees or labor in the loop with AI adoption and to grow business without adding to employees, generally speaking. Is it your aspiration as well at personnel? Or it's a high-touch business, it won't be possible because of your business model?

[indiscernible]

Everybody doing okay? Again, thank you for your attention today. As I was sitting through this morning and early part of this afternoon, I was jotting down a bunch of notes myself. And I shared some stuff earlier. A couple of questions that I don't know if they were fully answered. So I'm going to just touch on them quick, then go through a few slides here. And if I jump around, I apologize. The original plan for me was I was going to do a 10-minute kind of welcome and then shut up for the rest of day and let the folks that are making it happen talk. And Holden overruled me, and he said, we're going to have you close some stuff. And I said, well, then pull in a few slides I used in Florida. And then they went through their process of sanitizing it for outside viewing because when I pulled together something for an internal discussion, I just pulled together. And I'm using internal data, and it doesn't always have rebates and all the other stuff. So it's not an apples-and-apples sales number, but the trends are real. So they changed all my seats. So a few of these, I was looking at for the first time last night thinking, oh, this will be interesting. But just some thinking out loud stuff. There was a question earlier about monetizing some of the technology. If some of this AI and some of this technology we're deploying, if it causes us to grow faster, as I believe it will, I don't think there's a better monetization for our business than that because the market has historically been fair with Fastenal and the valuation we get. I still -- earlier at breakfast this morning, we were talking about something. And I said, yes, I remember when I joined Fastenal in '96. First discussion I had with my wife -- and I grew up on a farm in Wisconsin about an hour from here. I did not grow up in a family that participated in the stock market. Our participation in the economy was every spring, putting our life savings plus some borrowed money and sticking it in the ground, expecting it to grow and there'd be a crop to harvest that fall. And between now and then, we had to figure out how we were going to eat because we didn't have any cash flow coming in, except for some hogs we'd sell periodically or some cattle we'd sell once every 1.5 years. So it was a beef-and-hog operation as well. But I remember sitting down with my wife and I said, "Hey, I just got the CFO gig at Fastenal, and I think it would look good if we bought some stock." By the way, it's an industrial company and the valuation is 71x earnings. And so here's what's going to happen. We're going to go borrow some money. We're going to buy some stock. And if Fastenal performs really well in the next 5 years and the multiple compresses just a little bit, I think it will appreciate nothing. But it will look good. Even if compared to everybody else in the proxy, here's Bob Kierlin with X percent and Steve Slaggie, and here's Dan Florness with an asterisk because it's less than 2%. And believe me, it was way less than 2%. But the only bad investment I ever made in Fastenal wasn't a bad investment. My timing could have been better. This was in the fall of '98. I think it was fall. It was in 1998. I came to my wife and I said, "Hey, the stock just dropped to $42." And we've been about $47. And I wanted to buy some more stock. And we've done okay that year, and we had some bonuses, and I said, "I want to buy some stock." And I said, "We're going to buy 1,000 shares. But we're going to borrow $40,000 to buy the $42,000 worth of stock," because we just didn't -- we had a young family. We didn't have the cash available. And I said it will be a great investment. So we went out and we bought 1,000 shares of Fastenal stock. Nine days later, the Asian flu hit. And our $42 stock went to $21. And my wife called me up and she said, "Hey, Florness," if she's irritated with me, it's Florness. If she's not, it might be Dan, but it's probably Florness. And she says, "Do you realize if you had waited 9 days, we could have bought twice as much?" It wasn't it was a bad -- it's stock to buy. Just, "Hey, if we'd have waited 9 days, we'd have got twice as much." That stock that bought for $42 a share, that split twice every decade since, that's not a bad investment today, but we could have had twice as much. But for what it's worth -- but in monetizing, John and I -- and John and I both have the same cough. John and I were in Bangalore, India 3 weeks ago, I think it was. John was there for 2 weeks. I was there for just one. And then I went to Singapore, Malaysia, Thailand and bounced around, traveling with a bunch of our folks visiting Fastenal locations and a bunch of Fastenal customers. But we have 400 people in our technology -- we have about 800 people in our IT function within Fastenal. About 400 of those people are in Bangalore, India. And that's a group we've grown over the last decade dramatically in the last 5 or 6 years. And it's interesting, I was talking -- John had it set up. I was talking to the entire 400 in a room and did a very open Q&A session. I love the fact that John and Pramod, our local leader, have created a culture over there. It's very Fastenal, even though they're on the absolute opposite side of the planet, but very Fastenal, very open and very willing to ask questions. And folks over there are always a little bit nervous about, "Hey, what's going on," because there's a bunch of technology groups over there. And they're with a lot of global entities. But all of a sudden, somebody will have an office with 4,000 people, and they go and let 1,000 people go. And so I think they're always a little bit spooked by that. And somebody asked me, "Are we going to keep investing in this?" And I said yes. And I said, "Let me give you an example of an investment." When I stepped into this role, I said to the Board, and I said to John and I asked him to take over IT. We're going to spend 50 to 60 basis points more a year on IT because I think we're underinvesting. So we did a little bit under $8 billion last year. We're spending about 60 basis points more. And I said -- I looked around the room and I said, "That's about $50 million this year that we're spending that we wouldn't have been spending a decade ago. That's the only gift you're going to get." Now we have to find the rest. And I said, "Let's look at FASTCrib for a second." We have 20 -- we have about 200 -- last year, if you look at it, not from an account basis standpoint because we've spent a lot of work over the last couple of years, and we shared some of that in January, we had 275,000 unique buildings on the planet where our customers have an operation, where we supply product. 23,000 of those buildings, the customer in that facility does more than $5,000 a month. When we're building this FASTCrib, let's think about it from a few angles. I was in a customer down in Houston in August. When I was visiting that customer, they had 13 vending machines that weren't blue in the facility. And the person taking us around was new in procurement. And he looked at us and he said, "Oh, I hate these machines." He says, "I'm waiting for you guys to get the real ones in here, the blue ones." So these are 13 machines they have gone out and purchased because they were going to manage the process themselves. Those machines had about 1/3 the coils with product. Next to every machine, there was a bunch of boxes of product. So this company had been part of a large organization that had been spun out. So the maintenance people all kept their badges. They weren't supposed to, but they kept their former corporate parent badges because that's the only badge that would work on the vending machines. So the maintenance folks kept it, but everybody else turned in their badges dutifully like they should. So the stuff on the floor in boxes was for the folks that worked in the plant. The maintenance folks always wanted to have product for them. So they still had their old badges they weren't supposed to have because that's what worked in the vending machine. And by the way, they're paying $17,000 a year for software licensing for those 13 machines that, in my opinion, should just be forklifted and dropped in hole somewhere. And he was looking forward to us coming in and we subsequently signed that business. We have 23,000 customers that do more than $5,000. What if we built FASTCrib into something that's really special? And 10,000 of those 23,000 said, "You know what, hey, we want to use that. We want to license that." And this is, again, I'm talking to this 400 IT people. I said, what if we -- John knows the folks at Microsoft really well. I mean, Vic was here. And Vic has opened amazing doors for us at Microsoft. And we've learned a lot from them as we've learned from a lot of other technology companies because we do business with a lot of people. Microsoft is pretty good. I'm having fun with you, Vic. Microsoft is pretty good at knowing how to price their product and get revenue from Fastenal. They're really good at it. What if we learned a few things from them? And what if those 10,000 customers, 40% of the 23,000, 24,000, 25,000, what if they use the software, and they each pay $10,000 a year? I'm not real good at math, but I think that's $100 million. And what if it took us $25 million to keep that little hamster running in the computer and to operate that system and to develop it, not to initially build it, but to develop it and improve it every day? And Holden is kind of a money-grabber. And he wants to share with the Street, "Hey, this $100 million, we get $25 million of pretax we're going to record." So $100 million, less $25 million, less $25 million, there's $50 million there. If you want more investment in technology, create your revenue stream. If we have $100 million of revenue coming in from something like FASTCrib, and you want to double that $50 million that we injected into the IT group a decade ago, go get it yourself. Build that system, figure out a way to price it and monetize it, go in the marketplace. And this is a challenge I give to Jeff every day, go in the marketplace and look at all the softwares that are out there that people use to manage their cribs. How is that priced? What attributes do they have? What boxes do they check? And what do we have that's special? And can we get $10,000 a year from a customer? Can we get $1,000 a year? I don't know, pick a number. But that's how you grow it. 40 years ago, we built a captive trucking fleet. We built it because we went to our customers and said, "Hey, we need to charge something for the product we deliver." We went to our suppliers and say, "Hey, when you sell this product in our industry, everything is a delivered price. If we stop buy with our truck, if we're coming through Milwaukee and we stop in the pick product at 4 in the morning where we're delivering the branches, instead of paying it to a third party, will you pay that to us?" They're like, "We don't care who we pay it to." So we created a revenue stream and created a business. Today, over 90% of what we move across North America is on our trucks because we figured out a way to make it economical. I always have figured about 300 basis points of the delta between our operating margins and our peers' operating margins, it's just because we have a captive trucking fleet. And they haven't chosen to build one. Now it means we can provide a higher level of service. We can do things faster. We can leverage that network 2 directions. We can do things like industrial services and do tool repair because we have a truck that's going out to Omaha and it's coming back to Winona or it's coming back to Kansas City. It's got capacity to haul some tools. And so we can do a lot of things our competitors can't do because they haven't built that network effect. We have. If you -- I jotted down 5 reasons our customers -- our competitors don't like this, and I thought I'd share it. We made vending a thing and they hate it. It has become a standard in most RFPs. It's a necessary evil. Our competitors lose money on vending. We think that's so cool. And it's a great business for us, and we believe it separates us in the marketplace. The industrial services that Jeff was talking about when he was talking about FASTCrib, that's actually a profit center for us. If it weren't, I think we'd still do it. Because picture you have a business partner that does all these things for you, and then they do something that nobody else can do. Someday, we're going to stub our toe with a customer relationship. And that customers look at and say, "I get somebody else. But then I'd give up this, this, this, this and this. I love Fastenal. I love my local rep. I love the team." That's what makes us special. All these things that we've talked about today make us more efficient. We've talked about the last decade about our growth drivers. We've talked about vending. We've talked about Onsite. In many ways, we've overtold that story. And that's one of the things about what today is about. Those aren't growth drivers. Those are efficiency drivers in our business. Our growth driver is our culture and 17,000 people that engage with customers every day and solve problems for customers. The Onsite model just makes that $150,000 customer, $150,000 per month customer, cost effective because our branch network is too expensive for that, and it's too slow. And the Onsite is a better tool. Truth be told, quite a few of our Onsites aren't on-site. I think -- and Casey, maybe you have the exact number, but I think something like 55%, 60% of our Onsites were physically in their plant. Sometimes physically in their plant means we have 40% of our inventory there and 60% of it is stored a mile away in a building that we rent really cheaply. Sometimes if we have space, it's in the back of a branch. The reason we do that, and one of the things we're talking about here is, the reason we got that customer to $130,000 is we got them to engage with us. And one of the reasons we called it an Onsite, way our pay programs work, we could grow it faster that way. And we also had a discrete P&L and balance sheet on that business to measure our returns. So we knew we weren't taking the business down a bad path that eventually you all come to us and say, "What the hell are you guys thinking? This is bad business." It's not. It's a great business. We generate attractive returns in that business. But we're really good at taking their key accounts. And what that does, it deleverages a lot of our competitors. It leverages our business quite nicely. And it makes us stronger in that marketplace, and we're great at it, so we're aggressively going after key account business. We have a great talent development program. So we're great at recruiting and finding the best talent. We've always said our mantra is go find great people, ask them to join and give them a reason to stay. That reason is opportunity, how we treat each other as human beings and how we develop each other and how we challenge each other. The fifth one, and sorry about this, I think we look great in blue and the rest of the folks don't. And so we're pretty excited about our business. Let's see on the right. These are out of order. Okay, we're going to do it after we come back. So this is a look -- and you saw some discussion of this in the January earnings call. Jeff and I touched on aspects of this in our respective letters to shareholders. And one thing I picked up on in the January call, I think there were some folks taken aback a little bit to understand what concentrations we do have in the business. I'll tell you about the organization I joined in 1996. Average branch did $70,000 a month. The top -- and there was about 90 customers per branch. The top 10 -- when I say customers, account numbers. The top 10 account numbers represented about 2/3 of sales, so 65%, 70%. So we had a handful of customers in that branch doing $3,000, $4,000, $5,000 a month. And then we had a whole bunch of $300-a-month customers. And if Jeff were up here and I asked him, "Hey, how do you turn a $150,000 branch into a $200,000 branch?" He won't say, "Hey, you go out and you add 1,000 customers doing $500 a month." He'd say -- or I hope my math was right, 100 customers, whatever the math is, sorry, not that good at numbers. What he would say is he'd say this, "It's 2 customers that you decide to engage with and they decide to reciprocate. And that's how you turn a $150,000 branch into a $200,000 branch." Two customers go from being a $2,000 a month customer or not a customer at all, and now they're a $20,000 to $30,000 a month customer, and voilà, the branch is doing $200,000. What we've attempted to do over the last decade -- and if you go back 17 years ago, we had an Investor Day like this. In that Investor Day, we talked about two things. We talked about we were going to reduce the rate at which we're opening branches. We were going to cut it in half. As it turned out, when the '08, '09 meltdown occurred and as you kind of drifted forward to the next couple of years, we didn't cut it in half. We cut it essentially to 0, and we were opening 1% more branches a year. The other thing we did is we talked about pathway to profit. That was our coin at the other day and said, "Here's what happens when the average branch gets bigger." We run away from a bunch of our fixed costs, our occupancy drops, our occupancy relative to revenue drops, our labor relative to revenue drops. And all of a sudden, these become 20% plus operating margin businesses instead of being in the upper teens. What we -- but it also changed what we were doing in that we started investing in things like vending at that same time. And the reason we -- one of the reasons we could do it, if we're not spending all this money opening branches, we can spend something developing vending. We started automating our distribution centers. Well, what does vending do? Vending drives key accounts. If you have a customer that's doing $500 a month with you, and that's the universe of what they could spend or maybe it could be $700, a vending machine is meaningless because the vending machine is about going out and getting $1,500, $2,000 worth of spend. So what that did is that started driving our key accounts program in 2007. And truth be told, it actually started back in 1995. 2% of our sales in 1995 were national accounts. Bill was talking earlier, if you added up those 3 pieces, it's about 71% of sales. So if you want to look at it over the last 30 years, we've been developing concentration all along because we slowed our rate of branch openings. And then starting a decade ago, we started to close. So between 2007 and 2024, 91% of our growth came from the fact that we went crazy. We talked about growth drivers because change is anxiety for a lot of people. And internally, we had to get people wrapped around the Onsite model. And so we drove it and drove it and drove it. We talked about it and talked about it and talked about it to get people to make that transition. 40% of our business today is in Onsite with 2,000 customers. 91% of our growth over the last 17 years has come with customers doing more than $10,000 a month with us. We had 2,600 of them back in 2007. Today, we have about 13,000. Average customer has gone from $24,000 a month to $38,000 a month. And the reason that's gone up is half of that key account business, that 10,000-plus customer is in Onsite. The $5,000 to $10,000 a month customer over the last 17 years, that's 9% of our growth. So if you think about the math, 100% of our growth is coming from customers more than $5,000. The rest of the customers have been kind of treading water or we have this massive gardening lake. And we keep pulling customers that are doing $2,000 and we pull them up to doing $8,000 with us. We've been doing that for years. Our team is awesome at it. That's how we grow. And we've poured investments into being that. And then as time went on, we started to see, you know what, real estate got a lot more expensive during COVID. Buildings the size we operate in became a lot of local fulfillment centers for a lot of these e-commerce companies, and it got stupid expensive. And so over the last decade, we've been closing a lot of those locations. We closed 40% of our locations. Over the last 17 years, we lost 43% of our account base. They were all customers doing less than $500 a month because if you go from having 7 branches in Milwaukee and you go to 4, there's a bunch of customers that spent $50 a month with us, spent that because we were 3 blocks away. And now that we're 3 miles away, they don't spend with us anymore. That's not right or wrong. We didn't -- we just weren't the best supply chain partner for them. For our customers that are doing more than $5,000 a month, they never knew we had a branch in the first place because we deliver everything to their facility. They don't care where we're located. They do like the fact, as Casey said, that we're within 30 minutes because we won't let them down. Rather than I'm in Wausau, Wisconsin, and I have a supply chain partner that's still bringing product out of Green Bay, that might not give you some days because of the weather. We're in Wausau. That's a huge advantage. One thing we have been doing, and if I look at that last bucket, so 92% of our customers represent about 13% of our sales. That group has been slowly receding, again, closing locations. We changed our front room because we wanted to better utilize our real estate because we were using 60-plus percent of our real estate for 13% of our revenue, and we had a massive investment there. And we said, "You know what, we're not getting a return." And if you look at our business over the last decade, our returns have improved, and we've gotten incredibly aggressive with a key account strategy. Now I believe -- it's interesting, Christine, you didn't -- you saw -- I think maybe the nervous side of her, but she did a great talk. You should have seen her yesterday. So she has to deal with Jeff Hicks, who, on his second talk, didn't go long. Thank you. Jeff Watts, John Soderberg and Dan, and once a month, we have a discussion, we're getting updates as she's getting deeper into this role. We had the stupidest argument yesterday. We were talking about how to classify a web sale versus an e-commerce like EDI sale and how we should report that to the Street. And finally, I could see Christine was looking at us like with this stink eye look of, "Are you 4 going to shut up?" And I looked at Christine, I said, "Tell you what, Christine, tell me what these numbers are going to be 2 and 5 years from now and what your plan is for Fastenal to drive to that? You classify it any way you want, and we will tell the Street, 'You know what, this is how our folks want to grow it. This is how we're going to classify it, and we'll change it at some point. I don't know if that change will be a year from now or 6 months from now. I think all you should care is, hey, we're growing our e-commerce business. And here's our strategy to do it.'" Because to the other question that was asked, what percentage of the market is planned spend versus unplanned? For industrial customers, I have a number in my head. That number is 65% of their spend, I believe, is or should be planned spend based on all the stuff I've seen for the last 30 years. And about 1/3 of the spend is unplanned. It's a lot of little things. It's really important stuff. It's a lot of little things. We do really well in that 65%. And the question in the conversation with Christine that we need to answer ourselves is, on that other 1/3 of the revenue, how much do we think is going to be they stop by to pick it up? How much of that do we think they're going to order it via e-commerce, whether it's a web sale or a punch-out catalog, whatever you want to call it, how much is an EDI transmission? How much is they just call us on the phone and ask it or we're out making a delivery and they say, "Hey, Dave, the next time you're out, can you bring 10 of these?" We don't honestly care what we classify it as. We care that we grow it and that we have the best tool for doing it. There's 2 -- I have called the district managers throughout the year. And there's 2 districts that stand out for me when I'm thinking of the last decade. And if I were so inclined, I'm not, here's their detailed schedules for the last decade or the last 17 years. One of them, let's call him Jason. And let's just say Jason is in Southwestern Minnesota and Northwestern Iowa because that happens to be where his district is. From 2007 to 2012, that business grew, and it was a $20 million business in 2007. It grew 2.5%. Now I suspect we were growing better than that in the '08, '09 time frame, and there's not a sheet for this in your handout because I didn't want to try to sanitize that for public consumption. But we grew about 2.5%. It was probably 4% to 5%, but the '08, '09 kind of threw a monkey wrench in there. And in fact, from 2012 to 2017, that district grew 4.5%. Jason was a district manager in Nebraska and his wife wanted to get back closer to family. So he went -- moved to Mankato, Minnesota, Southwestern Minnesota. And in 2017, he took over that district. Jason is a key account-minded person. He is great with people. I'd love to work for Jason. From 2017 to 2022, that $27 million business, because that's what it was in 2017, grew 15% Why? Because he went from 52 to 76 customers doing more than $10,000 a month and 11 of those 24 were doing more than $50,000 a month. He went out and signed a bunch of Onsites. Go to Garner, Iowa sometime. It's -- I grew up in -- I went to high school in a small town in Wisconsin. Garner, Iowa is like the town I went to high school. And I think it's 2,200 people. I'm looking at Sarah because she's from that area. We do $700,000 a month in Garner, Iowa. We don't have a branch there. We have 3 Onsites. I went down and visited those, and we have a great team. We have a great relationship. And we do all their planned spend. I bet you, they have departments, their engineering teams and stuff like that, that don't spend a dime with us. We have a customer doing $250,000 month with us, and there's probably another $50,000, $60,000, $70,000 of spend that we're not getting because we don't have the best e-commerce site. And my comment to Jason is, "Man, we let you down, and we need to get better at that." That's the kind of discussion to have with Christine and our e-commerce team about what we could be and what the opportunity is. Today, that's a $63 million business. It did slow down last year. He only grew 8% because he had 3 customers that downsized, 1 closed their doors. Anyway, that happens. There's not a district manager I talk to that doesn't tell me about 2 customers whose business is down 40% or 60% from where it was 1 or 2 years ago. The number of $200,000 a month customers that are doing $80,000 a month with us right now is staggering. That's the bad news. The good news is, at some point, they're going to stop compressing. Maybe it's when the ISM stops -- stays above 50 for more than 2 months, maybe like 4 or 5. Time will tell. I don't know. You cut me off. Okay, Heather, I got to shut up. The other example, let's call him Blake, and let's say he's in Arizona. If you were a district manager for us, getting a call -- Jeff talked about at breakfast this morning, getting a call to go fix our business in Vancouver, British Columbia, 30 years ago or 28 years ago. That's when I first met Jeff when he was a district manager out there. And the person asked me to move said, "Tell you what, we have other opportunities for you, fix this, and you can move back to Ontario, and you can take that next opportunity. This is a good test." A lot of district managers didn't necessarily want to go to Phoenix. We really, really struggled there. So one of the examples Casey had in his time line, look, we did this little project in Phoenix. We thought we've been trying the same thing again and again and again, and it's not working, maybe we try something different. So we changed the branch. We changed the front room. In Arizona, it was easy to do because Arizona is kind of -- is a unique state in how we have to price product in an industrial supply house, which is ridiculous. And if we close the door and there's no retail, we don't need to do that because it's very labor intensive. So we closed the door. From 2007, 2012, that business grew 6.5%. It was an $8 million business that grew to $11.5 million. From 2012 to 2017, it grew 3.7%. It went from $11.5 million to basically $14 million. Since 2017, we've been adding $10,000 customers like crazy because the team has the time to go get it. From 2017 to 2022, that business grew 18%. From 2022 to 2023, it slowed. It grew 16%. And last year, it slowed more. We had a few customers shut down their operations and it only grew 8.5%. That's now a $40.6 million business because we changed what we're doing. I think that's pretty powerful where we're going. I'm excited for the groups that were up here. I'm really excited for Jeff and how he's restructured the sales team. I believe we'll be more successful in the next 10 years than we were in the last 10. And a few of you asked me, "Hey, Dan, how long are you sticking around?" I'm here until Jeff kicks me out the door. I'm 61 years old. I love coming to Fastenal every day. At some point, Jeff is either going to say, "Hey, I'm ready to step into that role." And I'll say, "See you." Or if it goes too long, I'll come into Jeff and say, "Hey, Jeff, I'm done next week. So let's move on." But I'm excited about what they have going on, and I'm really excited about what it means. And this next slide, this is looking at over time, how many customers we add in each bucket. And you can see that '23 and '24 is really, really ugly. In 2020, '21 and '22, we weren't adding enough contract business. Part of that was COVID. Part of that was us and not having our heads straight. Part of that was people weren't ready to come. Our customer show is a big deal because I'm a firm believer, if a customer knows what our supply chain offering is about, the only reason they won't select us -- I think there's probably 3 reasons why they won't. One is they're part of a corporate entity that says, "No, we don't have a contract with Fastenal. And so you can do some little dollars with them, but they can't be a major partner." The second one is the industrial supplier in this community is my brother-in-law. And it's going to be really painful in the family if I fire my brother-in-law. My wife will not be happy. My husband will not be happy, whatever the case might be. The third one is, it's not a brother-in-law, it's a really close friend. We did a Board trip a couple of years ago in North Carolina. And the customer, the President and the customer gave the tour. He knew more about what we were doing in that facility than I think we did. The supplier that we replaced was the best man in his wedding. And their families vacation together. And he sat down with them and said, "Here's why I'm switching to Fastenal." And I suspect their friendship survived that. But that tells you something about the decision that person made and how special he saw what we bring to the table in that market. The final one is, as we close branches, we lost a lot of these under $5,000 customers over time because, again, if we're not next to them, we're going to lose some of them. I believe 2025 is the last year that number is negative. You see how it's dropped dramatically. And that 52,000 is per year, not over the 5-year period. And it dropped dramatically last year when we stopped closing branches. And so you still had the tail of runoff. But I believe we exit 2025. And our sales guys think I'm a little too ambitious on this. I believe we exit 2025, and that number is treading water or growing slightly. But I believe in 2026, that number grows a little bit. It's not going to change our growth. But it will change our mindset, and it will tell me that if we're growing that number, we also have an opportunity to capture the unplanned spend with that customer in Garner, Iowa because we have built a better mousetrap of getting unplanned spend. And since Holden made this slide for me, I have to put it up, or else he's going to me a stink eye look. And that's just some wrap-up bullets. And the -- get to the page myself. I think we have great alignment within the organization around our key account strategy. And the neat thing is, as we've done -- migrated to that over the last 5, 6 years, our returns have improved. Our cash flow has improved. And our problems with growth in the last 2 years, I believe, are partly a function of coming out of COVID and some self-inflicted errors. We didn't add customers fast enough. And our environment has been pretty weak for the last 1.5 years, 2 years. We have a great toolbox, not a single tool, and they're not growth drivers. Our culture and our people are growth drivers. The tools we deploy help them be more effective and more efficient. Accelerating the FMI innovation, I mean that's over 40% of our revenue now. I believe it gets into the 60s eventually. Our process of going to market naturally collects information every day that we can illuminate for our customer. So it isn't we're going out there and having to collect data. Our process inherently does that straight to the point of use. That's incredible insight. And we're going to keep developing that toolbox and FASTCrib, I think, is a great example of that. We have 200 customers using it right now. It's an okay tool. I believe it can be a great tool. And an example, so my family, we go to Door County every year. Door County, Wisconsin, for those of you who aren't from the area. It's that part of Wisconsin that sticks up in the Lake Michigan, North of Chicago. And usually during that week, you need a half a day break from your family. So 2 years ago, during that half-day break, I went down and visited some customers in Sturgeon Bay. One of those customers was talking about our RFID system and said, "We'd love to use that for our own production scheduling, for our own pulling other stuff we're buying through the system." Now with vending, we've never allowed that because the investment is too big and that tool is for our product revenue generation. But if the customer has some stuff they're directly ordering, maybe that FASTBin system, that RFID system is tethered to our FASTCrib system, and the customer can use it for some things. And we do license that and monetize the system that way on product that we're not going to get that spend because we're not the best supply chain partner for that spend, at least not yet. But maybe we are once we understand it. That's all I have. Thanks for being here, listening to 12 people talk at you all day, and I hope all of you make the trip and tour the branch. And Jeff, you need to come upfront in case there's some Q&A. And in case there's a vending question -- or not a vending, a tariff question, Kevin, you can't be too far away. I don't know if there will be.

We have about 20 minutes for Q&A before we depart for the branch. So questions first, I think we had -- do you want to reask your question?

Yes, I was wondering what's the outlook for employee productivity at Fastenal specifically going forward with all these exciting new technologies that you adopt around AI, et cetera. Are you able to grow business without adding much employees or the high touch of the business will mean you still need to add employees at a higher rate going forward?

I don't -- Jeff, you can take -- I'll take a shot at it, and you can correct it. But it allows us to be more efficient. Now we might -- and so we might not need more energy for some of the sourcing activities. Whether we choose to lean that out of the system or we choose to deploy that to try to grow faster. I don't know if we know the answer to that. But for the business we have, if we're more efficient, we wouldn't need to add people. Just for the business we have, we wouldn't need to add people as fast as the revenue growth. And what's nice about that is sometimes that revenue growth isn't at the same margin profile because you're adding pallet-level shipments rather than box-level shipments. But whether it's measured at the sales or -- for us, that key ratio Holden talked about is really critical. I believe it allows us to keep improving our key ratio over time, and that's productivity. So the answer, I've given you a long drawn-out answer, we will be more efficient. We won't need to add as fast unless we decide to. And then we'd add another 10 minutes for another question. Sorry, I'll let him point.

With the sales realignment and the key contract initiatives and everything you've gone over today, is it more of a goal to -- or do you think that through all of these things, the outgrowth that you're going to see in the business is going to allow you to get to a double-digit sales target, excluding an improvement in macro? Is that the goal? Or is it more to maintain kind of your historical, call it, 500, 600 basis point outgrowth and then you still need some help from the macro side to get to the double digit?

I would say without the help, that's really what the goal is, is to get to that number without the help, the economy, whatever that may be. That's -- go ahead.

But I'll throw a twist. If the economy is pulling air out of the balloon, we don't need the economy to push us up. But it can't -- but right now, it is pushing us down. And so I see it as that 600 to 700 basis points you talked about, can we get that to 1,000 basis points? And now if the economy is pulling us down 200, 300, it's pulling us down 200, 300. If it pushing us up 200, 300, it's pushing us up. Now we haven't proven we can do that, but I can cite a lot of district examples where we have. And that's what Casey was talking about in his time line. That's -- and key for us, one thing that's about being an entrepreneurial organization, there are so many examples of where we're finding -- discovering success. And our challenge is how do we tell that story to other district managers. We have 240 district managers. How do we get a high percentage of that group? On that slide I had up, we talked about adding 1,000 $10,000 plus, more per diem. It shouldn't be that big a deal. And that's a net number, not a gross number. If you lose 2, you need to add 6. But it's blowing it down and just saying district management district manager. Here's what we need to do to be successful.

One thing I'll add because [indiscernible] comfortably is we talked about the Focus 40 being the 20% revenue growth, 20% profit growth. That's an aspiration. Think about when we talked about 375 to 400 Onsites. The truth is we never signed 375 to 400 Onsites. Never got there. It was a stretch goal. And it created a mindset of what are you going to reach for, how are you going to prioritize performing better and building something that's durable and scaled. And when we talk about Focus 40, we had in the slide deck very specific. It's a mindset. I don't know that the business is going to be a consistent 20% revenue grower with a 20% pretax profit. Again, that's unproven, let's say. But the mindset is you should be aspiring to that at the branch level, at the district level, at the region level. And if you don't make it, that's okay, but did you get better? And that is the aspiration. So I just want to be very clear because I know everyone is looking for sort of how to characterize things.

And ultimately, you understand why you did or didn't make it.

I guess to kind of build off that question a little bit, and I'll kind of point to Jeff first. Clearly, there's plenty of opportunity in the market. You've got a massive toolbox to work with here. So you've got all the pieces in place. I guess the unfair question to ask is, which component are you most excited about helping drive you towards that double-digit growth you're expecting to earn? I know you love all your children equally, but is there anything you'd point to?

I think before we get -- before I answer that, one thing that I would point out is -- and we did discuss it. We didn't get into a lot of detail. But the one thing that is very important to understand is that in the United States business unit, we aligned the pay programs in the branches. And that hadn't been done in a very long time. So if you think about how much our business has grown in the last 10 years, pay programs for us really drive activity. And we hadn't changed that program. The difference between growing overall sales at 5% to 8% wasn't that big of a deal on the new pay programs -- on the old pay programs, sorry. By us aligning that pay program, it changes everything in the field. It really does. It goes for our top line growth. It goes for our margin, operating margin, it goes for our assets. We've never had that in the U.S. before. So that may have been an answer to a different question. But I want to make sure that's understood because it's a really big deal for us and everybody in the room at the back. And I'm sorry, now I forgot your question.

No, that was really it. It was which -- yes, nailed it.

Okay. Good. All right. Perfect. Thank you. Next.

We haven't talked a lot about margins today, but I feel like we should before we leave. So in prior years where the conversation was more narrowly focused, I noticed Dan sat down as soon as I started talking that when we were more narrowly focused on Onsite and national account, there was a conversation where we could kind of take away that there was some gross margin pressure in a given year if you succeeded on some of those initiatives, but that it was more a focus on how much could you lever those GP dollars over the OpEx, right? And you could still defend or expand that operating margin. So today, we're abstracting a little -- or stepping back a little bit, talking more broadly about the toolbox and key accounts, what, if anything, changes here on the margin side?

I don't think anything structural changes on the margin side. We've always believed that our business can support a 21% plus type operating margin, and we still believe that to be the case. That hasn't changed. In fact, a lot of what you've heard us talk about today, not only is it about growth because it is because we believe that the more you can do, the more customers are going to ask us to do it. But we've also talked significantly about how it drives productivity, our productivity and our customers' productivity. And so again, 70% of our expenses, our operating expenses is labor. You got to leverage labor. A lot of the things that we're talking about with data, the tools, how you approach your customers, how you structure the field operations, a lot of that is about making sure that we can leverage our labor. So we're still talking about larger customers. Those larger customers are going to generally have a lower gross margin, but we're also talking about scale. And by becoming more productive for ourselves and more productive for our customers, we will be able to leverage the additional scale that comes up. So I don't think there's a fundamental change in how we view the margin profile of the business. And quite frankly, that's deliberate. That margin is what allows us to have the capital to invest in the things that we're investing in.

The unplanned spend, if we get traction on that, that's a help to our gross margin, particularly if it's in fasteners.

And if it's heavily e-com, there's profit margin there as well, yes, if it's efficient business, yes.

This has been great. Question just on the growth rate. So if you were to break it down, how much is coming from new large customers versus share of wallet? What's the bigger opportunity if you dissect those 2?

If the -- so I talked about how our -- using the $10,000 plus as an example, it's gone from $24,000 a customer per month to $38,000 over that time frame. So a piece -- most of it's been customer expansion because we've gone from -- again, I'm using the 1,700 -- or the 17-year threshold. If I use the 5, it would be the same dynamic, just different time frame. And I know those numbers offhand. So we went from $24,000 to $38,000 per customer. We went from 2,500 customers to 13,000. I would suspect if we do a nice job with the $50,000 plus, which I believe we will do, that $38,000 goes to $40,000 and then it goes to $41,000, $42,000, then it goes to $44,000, and we slowly raised that. I don't know if it gets to $50,000. So I think there's a limited runway to that, and then it's about customer acquisition, more acutely. And the only way it drives up after that is the example I had about Garner, Iowa, where if everybody in that building, the people in R&D, the people in maintenance, everybody looks at and says, "Hey, we're going to go to the Fastenal website first," then it is dollars per customer. And maybe we pick up an extra $5,000 because of that or $10,000 because of that. Again, I think the universe of opportunity is about that $38,000 it's probably 20% of that number that we could expand. And the question is how much of it do you get? Do you get 1/4 of it, get 1/2 of it.

And just a follow-up, private label, how big is that for you guys? How much is your own manufacturing? What's the color there?

Yes. We don't include our own manufacturing in our private label numbers because we want to have some pure things to look at. So our manufacturing has historically been 4% -- 3% to 5% of sales. Our private label, what we often refer to as exclusive brands, brands sold exclusively through Fastenal. That's low double digits to revenue. But it really isn't a thing in the fastener business. So it's about 20% of our non-fasteners. And ultimately, the way to grow that is when you think of our vending, for FMI in general, but particularly vending, as we do more and more things through our LIFT facilities, what we should be doing and what we're building our systems to do is we have a bunch of suppliers that are our preferred brands. And then we have a bunch of brands that are Fastenal brands. We should be challenging our team of saying, these 2 should be our first 2 choices. And if it's a brand that we just don't support, the only way you put that in the vending machine, if the customer says, well, I'm not going to buy from you if you don't use this brand. And then you know what we do, we use that brand. But other than that, we should be driving our preferred partners and our EBs. And I think it should be 40% of the business for each. And 80% of our vending revenue should be either preferred or EB. Now our folks listening right now are probably saying, "Dan, you're on drugs." If we got that number to 25, and 25, that would be a home run. Time will tell.

Time for one more.

Yes, 2 questions. Dan, how many $10,000 a month customers are there in the opportunity set? And then how many do you think you can sign a year? And then, Jeff, you mentioned $15 billion as a long-term sales target. Any assumptions that you could share with the group about how you might get there? Time or whatever you want to share or just have Dan answer that one.

Yes, yes. First off, that's not a target. That's a point in time. A decade ago, we were at $3.5 billion, and we talked about we'd get to $5 billion, we'd get to $8 billion, we'd get to $10 billion. That wasn't -- It wasn't a target. It's just -- at some point, we'll get here, and we'll pass that by. At least that's what we believe. I'm not touching with a ten-foot pole because he's driving the ship. But all kidding aside, what was the other half of your question?

How many $10,000? And how many do you think you can sign a year? I think you said 1,000 earlier, but I don't know if that was a target.

That's not -- the message to our team is a decade ago when I stepped into this role and was having discussions with our district managers and our regional VPs at our December meeting, I said in a few years, we're going to be a $5 billion company. And we need to have a plan -- and I'm about math. We need to have a plan to add $500 million a year in revenue. We want to grow 10%. I mean, just simple numbers. And I'm pleased to say between 2017 and 2022, we averaged like $517 million in new revenue a year. Now it wasn't a straight line. We had 2 years that were really good and a few years that weren't. One of those was COVID. But the math now is we're going to be $10 billion before we know it. That means we have to add $1 billion a year if he wants to grow 10%. I believe we can do that. And in the short term, the message I had for our Board is we need to add 1,000 $10,000 customers. But eventually, that will go to 1,500. The other part of the question is how many are there out there? We don't know. What I can tell you, when we vet out and identify Onsite potential, on average, we identify 58 per district manager. Now that's $100,000 plus or $80,000 plus is kind of our threshold. I think that means that if we go to $50,000 and that goes up maybe 20%. You go to $10,000, that's going up in multiples. I don't know if I know what that multiple is. But I do know the market is really big, and we have single-digit market share or maybe in fasteners, we have double-digit market share. There is ample opportunity out there for us to grow at a very attractive clip for years into the future. But I couldn't put a number on it and say it's 200 per diem. I don't know the number, but I'd be surprised if it isn't at least that. But I'm speculating now, which just gets me in trouble. Your earlier question about who else is gathering data, I did want to answer that one. There's one company, I think, that does -- it's not -- they're not in our space. I think Watsco does a nice job on some of the technology they've deployed. And a lot of that is about gathering information on deployed units. And so they're monitoring equipment that's out there, and they're gathering data. So it's a different context than what we do, but it's still -- things are tethered. My wife and I just built a new house. We became empty nesters. We decided to get rid of our old house and a different house. And I got up on my phone. I didn't have this in my old house. If I want to change the temperature, I didn't do a funny thing I could walk over to the thermostat and turn a dial in the garage or push a button and go up and down arrow. Now I can just do it from my phone, and I can tell you, "Hey, in Western Wisconsin, the temperature right now is 52 degrees outside, and it's 68 in-house." But that kind of technology, they've done a nice job with that, to answer that question.

That's all the time we have. I want to thank, first off, all of our speakers, Vic Miles from Microsoft. Thank you. Obviously, all the Fastenal people have to present, but Vic Miles made a choice to leave Microsoft for a day and come join us. Thank you for that. I want to thank the people that also help put this together, Gene Dubois, Taylor Ranta Oborski, Drey and Jeff Kammerer. Obviously, they put a lot of this together. They also asked one question, and this is probably the most Fastenal question. If you're not -- if you want to keep these, be our guest. If you're not going to keep these, don't throw them away, leave them on the table. We'll take them and we'll reuse them. The branch tour starts at 3 -- I'm sorry, starts at 3:30. About 7 minutes, it's about 7 minutes from here, assuming no traffic and all that. The address, which is on the schedule is 615 Hale Ave. North in Oakdale and should be in here. And for those who are touring it, great, we'll see you over there in about 30 minutes. For those who aren't, thank you very much for the attendance and for all the thoughtful questions, and hope it's been useful to you. Take care.