Bloomberg Host (possibly Tim Stanovec) (2:53)

Our next guest is head of a company in the great state of Minnesota. We're talking about Fastenal recently reported earnings. The stock selling off on the day of the report but rallying the day after the most in nine months. That trade reaction had us scratching our heads. So we're grateful, Carol, to have back with us to talk about the release of the outlook. The CEO of the close to $50 billion market cap company Fastenal, Dan Florennes is back with us.

Carol Massar (3:16)

Yeah. So delighted. Let's get to it. Dan, good to have you here. Happy New Year. We do love talking with you. We feel like we get a great read on the US Economy, the manufacturing world. You've seen a lot in your career. We want to get to all of this. But I really do feel like we'd be remiss to not ask you about what's going on in home state. And I feel like those who are listening might be curious if you were asked to sign this letter of CEOs who want a de escalation of what's happening in Minneapolis specifically. So can you were you aware that this letter was happening or were you.

Dan Florness, CEO of Fastenal (3:51)

Asked to sign it was first off, Happy New Year and thanks for allowing me to participate today. I was not aware of it. We're outstate Minnesota. We're about two and a half hours from the Minneapolis St. Paul market. And so it's not uncommon. It's a pretty tight knit group up in the Twin Cities and was not aware of it going out with that. Sid was not surprised by going out and it seemed to be pretty common sense of hey, let's dial down the heat.

Carol Massar (4:21)

So would you have signed it though, if asked?

Dan Florness, CEO of Fastenal (4:23)

Yeah, I would have signed that.

Carol Massar (4:28)

We talk so much about leadership at this time and I am curious what you see as the responsibility of leaders in the United States when we see situations happening where it feels like and again, I don't want to get political, I don't want to take sides. But it does feel like Americans are being what some would say is targeted unfairly.

Dan Florness, CEO of Fastenal (4:50)

Yeah. You know, I think as a leader one of our, one of our tasks are to create some calm in the air. You know, I think back a few years ago when Covid was going on it seemed like every, everybody, every day turned everything into a political thing. And sometimes it's a case of, you know, if you're around a bunch of people that, that are High at risk. In the case of COVID put a mask on. If you're, if you're not and you don't want to be there, then go someplace else. You know, same thing here. Let's try to dial the heat down and focus on what we're trying to accomplish, not how we can see. You can be the most boisterous in the, in the market of throwing ideas out. And that's on both sides of the, of the fence.

Bloomberg Host (possibly Tim Stanovec) (5:36)

Dan, one thing that we're trying to figure out is getting a good read on the economy. And you guys have such a great read on it given that you touch so many sectors. I mean, if you're using nuts, bolts, screws, anchors, rivets, any kind of fastener, industrial, janitorial, safety supplies, you guys do it on earnings. You mentioned the broader market conditions remained mixed. What exactly did you mean by that when you say mixed? What's the good, what's the bad?

Dan Florness, CEO of Fastenal (6:01)

Well, mixed from the standpoint, we focus a lot on the, is the Purchasing Managers index published by ESM and that's been, you know, sub 50 for 36 of the last 38 months. So from the standpoint of the economy is not given us any lift. We are getting good traction in the marketplace and we, we finished out the last half of 2025 with double digit growth. That's really an exercise of taking market share more than the wind is to our backs.

Carol Massar (6:32)

And I know we've talked about this too, Dan, with you, about being in a prolonged downturn in the industrial economy. Any green shoots that you are seeing or signs of an inflection, and if so, I'm just curious, what markets might you be optimistic and which are maybe running weaker than you anticipated and maybe will continue to this year?

Dan Florness, CEO of Fastenal (6:52)

This is a little bit of an anecdotal answer, so I apologize for that. We're seeing in some of the published data some industrial production numbers improving late in the year. We aren't seeing that directly in our business, but for us, November, December is a seasonally weak period. So that doesn't surprise me that we won't see it. So don't know if there's some green shoots there. I can tell you this from my travel. If it's a business that's, you know, linked to certain industries and, and data center is an example from a recent trip I had on the east coast where I was visiting a mechanical contractor and their business was on fire and 70% of their activity was around data centers. Hmm.

Bloomberg Host (possibly Tim Stanovec) (7:34)

So on.

Carol Massar (7:35)

So go ahead. So that's the good part, right? And that, that's the good part. That story we keep hearing about the AI build out, the data center build out, you saw it firsthand. It's real.

Dan Florness, CEO of Fastenal (7:45)

It's real. It's real. In fact, I had a, I spent a big chunk of my time having conversations with our district leaders. We have about 240 district managers. They each run about a $35 million business. You add them all up, that's an $8 billion fastenal. So I had a conversation with our team in Atlanta this morning, one of our district managers, and most of his discussion was about business pickup he's seeing in his market because of data centers. Now, Atlanta is unique in that. It's one of a handful that are really being impacted by that buildup.

Bloomberg Host (possibly Tim Stanovec) (8:19)

What is the pricing power, Dan, that the company has right now? Because historically during periods of inflation, you've been able to be pretty aggressive with, with price increases. I think people would argue you weren't as aggressive as you could have been in 2025. What's the barrier to pushing price more aggressively?

Dan Florness, CEO of Fastenal (8:37)

Well, you know, the one barrier is the size of the customer, the nature of the products, how much of it is production centered versus maintenance centered. And because when it's production centered business, you have customers buying a very large volume of narrow band of SKUs and their price sensitivity is different than if it's MRO and they're buying, you know, $100 of this and $100 of that.

Carol Massar (9:03)

You know, one of the things I want to ask you too, there was a story on my read in this morning, Dan, in terms of Volkswagen saying that they're going to had plans for a possible Audi factory in the United States. They're not progressing due to President Donald Trump's tariffs and unsuccessful talks for local incentives. So we have certainly seen an administration that talks about all the investment money coming into the US And I think we here at Bloomberg continue to try and figure out how much of this is actually going to play out. You can say you're going to invest and then there's the reality of actually building facilities. First of all, tariffs. And I know we've talked about this with you in the past, so forgive me if I'm repeating, but you're thinking about outsourcing. How have tariffs changed that? Especially when it comes to fasteners, I think primarily sourced from China and Asia. So I'm just curious how any of it's been shifting for you.

Dan Florness, CEO of Fastenal (9:50)

Yeah, so you are absolutely correct. Most of the fasteners in this country in North America in general, come from northern Asia, China primarily. Obviously, huge impacts. And for us, what it's meant is over. For about the last six years, seven years, we've been actively expanding our ability to import fasteners because there's still not a lot of domestic production. And so when I think back to 2018, our primary sourcing entity was based in Shanghai with a. With a secondary location in southern Taiwan. Today we have personnel in Bangkok, we have personnel in India. And that's where all of our growth and movement of sourcing personnel has occurred over the last seven, eight years to just broaden our ability to be a little more agile and where you source from, depending on the geography it's going into.

Bloomberg Host (possibly Tim Stanovec) (10:48)

So that's on the sourcing side, but. But what about on your customer side and about customers moving manufacturing back to the U.S. are you seeing that happen? Are you hearing discussions of that?

Dan Florness, CEO of Fastenal (11:00)

Yeah, I guess, you know, anecdotally, yes. I can't say that we've seen tremendous influx. What I would say is I hear less about stuff leaving than maybe I would have, you know, 10 years ago or five years ago. And that in itself is a win from the standpoint of production. But a lot of it is folks are getting closer to where the end customer is for a lot of our customers. When I see customers expanding production facilities in North America, and I'll say more broadly than North America, rather than just the United States, it's usually to service more efficiently the local market, which makes sense.

Carol Massar (11:49)

Which we've seen that trend happening. I feel like over time. Hey, Dan, you mentioned about maybe less companies leaving the U.S. speaking of leaving, you are stepping down as CEO come July. You've been CEO since 2016. You were CFO before that going back to 2002. You've been there a long time. And I know last time you were on, I asked you a question about this cycle, and I was not very kind. I got yelled at by my team because I think I gave you 20 seconds, but I wanted. We. We do get yelled at.

Bloomberg Host (possibly Tim Stanovec) (12:19)

You get 25 seconds now.

Carol Massar (12:21)

No, no, no. You've got almost two minutes. How do you describe this cycle? Because it's. It feels unusual.

Dan Florness, CEO of Fastenal (12:28)

Well, it's unusual in that, you know, you hear about everything. Whereas in years past, there was so much of this political stuff that went on, but most of it, if you weren't in the midst of it, you were oblivious to, and you just. You just, you went around about your life. Now everybody hears about everything when it happens. So that's just a Lot more noise. On the flip side, what's really different is I mentioned on that conversation with the team in Atlanta this morning, we were talking about data centers and one of the people on the call, he leads our business in the southern U.S. he said, hey Dan, I'm going to flip you something. He punched in a bunch of questions and he came back with a 29 page report on the data center industry in the United States. I read through a bunch of it. It's actually pretty accurate and pretty good information. I mean, there's stuff in there I can pick apart, but it's pretty good.

Carol Massar (13:27)

Yeah, I know. Well, you know. Okay.

Bloomberg Host (possibly Tim Stanovec) (13:30)

Now Dan still had to do the reading though. It didn't read the report for him.

Dan Florness, CEO of Fastenal (13:34)

So I probably would have.

Carol Massar (13:35)

But I'm old school, I guess, is that just quickly. I know this is truly like 30 seconds. Is that the most transformative change you think we'll see over the next decade is just the continued impact of AI and things like ChatGPT and everything else connected? Just your quick thought on that?

Dan Florness, CEO of Fastenal (13:51)

Yeah, because I mean, when I think of our business, we're selling tens of thousands of different parts to customers every day. And the ability to improve the visibility for folks sourcing all that stuff is an incredible efficiency tool.

Carol Massar (14:07)

All right, Dan, come back soon, especially before you leave in the summer. Dan Fett. Dan, thank you.

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