Fastenal Company
Q4 2020 Earnings Call Transcript

Published: 20 Jan 2021

[Operator:]

Greetings, and welcome to the Fastenal 2020 Annual and Q4 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Ellen Stolts. Please go ahead.

[Ellen Stolts:]

Welcome to the Fastenal Company 2020 annual and fourth quarter earnings conference call. This call will be hosted by Dan Florness, our President and Chief Executive Officer; and Holden Lewis, our Chief Financial Quarter. The call will last for up to one hour and will start with a general overview of our annual and quarterly results and operations, with the remainder of the time being open for questions and answers.

[Dan Florness:]

Thanks, Ellen and good morning, everybody. And thank you for joining us for the Q4 2020 earnings call. I might not be on my A game today. And I point that only because typically when I do this call, I'm very fortunate that I have a moderator in the background and that is my wife who listens and will text me if I'm speaking too fast or rapidly or if I'm going too long. And then somebody who might say she needs to step in sooner. But today, I think she's probably online trying to see if she can convert her Packers season tickets into two tickets for Sunday's game. Time will tell. But if I go off on tangents, I apologize for that. I'd like to start with recapping our board meeting. The last yesterday discussions with leadership earlier this morning as we were able to share our earnings and our progress we'll look more broadly within the organization. And a bit of the video that we share with the 20,000 plus employees within Fastenal. And one is a more somber piece. And that is, as we've done in prior quarters, just want to share some COVID statistics with our shareholders. Because we can talk about a lot of things, but we have to start with most important and that is we were not immune, if you will, to the effects of COVID on the health of the Fastenal Blue Team family. Through September, and I previously shared that -- this information, we had 344 cases of COVID within the Fastenal organization. In the month of September, we were averaging about 17 new cases a week. In October, and as we progress into the fourth quarter we experienced what was experienced generally speaking throughout the markets when we operate, our case count increased dramatically. In October, we had 27 cases per week, a 10 increase over the 17 in September. So 106 cases, so through October, we had cumulatively 450 cases within the Fastenal family.

[Holden Lewis:]

Great self-control, Dan. Good morning. All right, good morning. Flipping over to Slide 7. Fourth quarter of 2020, sales were up 6.4% annually. That’s acceleration from the third quarter. Holiday timing was favorable this year, but even so, the overall tenor of the marketplace continues to improve during the period. Sales of safety products were up 34.6%, driven by growth to state and local government and healthcare customers, which is at 98.3% in the period. This continues to be some blend of COVID mitigation, PPE restocking and pre-stocking as well as share gains. The most encouraging data point is that 28% of the accounts that bought PPE from us for the first time in the second quarter of 2020, bought from us in the fourth quarter, and they tended to be the larger opportunities. So this continues to reinforce that we have gained share and increased our growth prospects in state and local government and healthcare customers that’s going to carry into 2021. Non-safety products were up 0.3% annually, accelerating versus the third quarter of 2020. Janitorial products, driven by the same trends as safety, were up 30.3%. More cyclical verticals remained negative in the fourth quarter of 2020, but generally saw moderation in the rates of decline. In fact, fasteners and material handling added into growth territory in December. Improving macro data is producing better trends in core markets, particularly in manufacturing, which grew 1.7% in the fourth quarter of 2020. We don’t have a lot of visibility, but our regional VPs remain optimistic that activity will continue to improve. The exception to this normalization is our growth driver signings. COVID continues to negatively affect labor markets and supply chains, but our customers are operating around those conditions. We believe that absent COVID, the market will support 100 vending signings per day and 100 onsite signings per quarter. However, lack of access to facilities and decision makers in light of COVID protocols is delaying new commitments. The challenge that is carrying into the first quarter of 2021 and makes it difficult to determine when signings activity will return to potential. Now to Slide 8. Gross margin was 45.6% in the fourth quarter of 2020, down 130 basis points due to product and channel mix, relative growth of lower margin COVID products and organizational factors such as further clearance, lower vendor rebates and overhead deleveraging. Gross margin was up 30 basis points sequentially in a quarter that more commonly sees a decline. Relative to the third quarter of 2020, we saw the revenue share of lower margin COVID-related products declined by 200 basis points, even as the margin on those products improved by 200 basis points on selective pricing actions taken in the quarter. We also experienced more favorable shipping and fleet costs in the period, largely from having rationalized our weekly routes earlier in the year. Strong growth and continued tight control of cost generated 210 basis points of SG&A leverage to produce an operating margin of 19.5%, up 80 basis points year-to-year. Nearly half this leverage came over labor costs as our record fourth quarter sales were achieved with headcount that was down mid-single-digits versus last year. Labor productivity improved meaningfully in the fourth quarter and full year of 2020, and we will look to sustain this in 2021. We also leveraged occupancy on lower branch count and vending costs as well as other expenses on tight control of travel, lower freight cost as we rationalized our branch pickup fleet and lower insurance costs. Our incremental margin was 31%. If you put it all together, we reported a fourth quarter 2020 earnings per share of $0.34, up 9.6% from $0.31 in the fourth quarter of 2019. Turning to Slide 9. We produced $321 million of operating cash flow in the fourth quarter of 2020, representing 164% of net income. For the full year, we produced $1.1 billion of operating cash flow or 128% of net income. Weak demand freed up cash working capital and we did benefit from $30 million in CARES Act-related deferred payroll taxes and about $20 million in payables that moved from the fourth quarter of 2020 to the first quarter of 2021. However, we also believe we are taking steps to be more productive with working capital. Accounts receivable were up 3.7% with growth related to higher sales mitigated by improved collections with past dues down 23% year-over-year. Inventories were down 2.1%. We have taken steps to make it easier to move inventory internally to get it where it can best be used, which has been particularly useful as we have closed branches and migrated other branches to a leaner inventory model. We put energy into clearing older stock from our branches and hubs. As a result, branch inventory was down nearly 8% at year end, while onsite and hub inventory was up just low-single-digits. Net capital spending was $158 million in 2020, the lower end of our $155 million to $180 million range. In 2021, we expect net capital spending to be $170 million to $200 million with the increase over the prior year being a combination of catch-up maintenance spending following tight spending controls in 2020 as well as higher spending for a non-hub facility project in Winona to support our growth. Record net income and operating cash flow in 2020 allowed us to acquire the assets of Apex, deploy significant resources to secure critical product and carry working capital for customers and return $855 million to investors in the form of dividends, including a special dividend in December and share repurchase. At the same time, net debt is just 5.1% of total capital, and substantially all of our revolvers are available for use. Now before turning it over to Q&A, there is one change to reporting I wanted to discuss, and Dan alluded to this. The bin stocks have long been used in distribution to hold product in customer facilities. Over the last few years, we have taken these bins and we’ve equipped them with scales or sensors that turn them into digital tools that provide product visibility, continuously monitor those products and generate fulfillment efficiencies. These FAST Bins complement vending, expand the products that can be digitally managed and round out our Fastenal Managed Inventory or FMI offering, and we anticipate commercializing them more aggressively in 2021. As a result, in 2021, we will replace reporting on vending signings with weighted FMI signings. This is going to convert each vending device and FAST Bin device into a standard unit based on the target output of our FAST 5,000 vending machines, which is 2,000 a month and combine that into a single data point. In 2020, our weighted FMI signings were 15,724. In 2021, we are targeting 23,000 to 25,000 weighted FMI signings. With that operator, we’ll take questions.

[Operator:]

Our first question today is coming from Adam Uhlman from Cleveland Research.

[AdamUhlman:]

Hey guys, good morning. Congrats on the successful year. Hey, also if you could help us out with maybe some insights or a framework of how you're thinking about margins for this current year. The company did a great job controlling costs in a tough environment, seems like perhaps hiring picks up and some other expenses like bonuses should probably be bigger. And any kind of rough framework you could help us out with.

[DanFlorness:]

You broke up a little bit there. I guess I should probably interpret about 20 questions in that one. So I will try to keep it short. If I think about starting at gross margin, if I think about 202, this might be one of those years where given the easy comps that we have, I would expect our gross margin to be up year-over-year. Now, I've had some conversations with folks that are getting really, really high numbers and that sort of thing. So I don't think that the concept surprises anybody but order of magnitude, I think, we need to think about in 2019, our gross margin is 47.2%. If nothing else had changed, let's assume that mix would have pulled that down 60 basis points a year in 2020 and 2021, which puts it about 46% just naturally on mix if nothing else had changed. But if I think about it; so if I think about that as kind of a baseline, it's true that I don't expect the inefficiencies, particularly in the second quarter to repeat. But I do expect that we're going to have higher COVID mix in 2020, just those types of projects in 2021, than we did in 2019. And I think that's going to work against that 2019 baseline a little bit. If I think about, we're still going to be selling through mask inventory, through the first two or three quarters of the year, and that's going to pull margin down a little bit. I will tell you, I think the shipping costs are showing every indication of probably moving up as we get towards the end of first quarter into second quarter. And so I think there's a pressure there. And so, like I said, I do believe that our gross margin will be up a bit in 2021 or 2020. But as I said, I think we need to be somewhat tempered in our expectations of the order of magnitude. And I say that only because I've had some conversations where I think people are being a bit over aggressive with that. So hopefully that gives you, Adam, a little bit of a framework to think about gross margin. As relates to operating margin, I would expect that labor would get better, or that we would add labor. I do say they are getting better because it means we are adding selling energy. But whatever our growth winds up being at the top line. I would expect that our increase in FTEs would be no more than 50% of that gross and then perhaps somewhat less than that, and I think that's kind of the objective of the organization. And so I think that we will leverage labor when we grow this year. And so when you tie it all together, I'm still thinking in terms of the framework of 20% to 25% incremental margins, based on whatever level of growth that we can achieve this year, and those are I think, the pieces that I would think about.

[Operator:]

The question today is coming from David Manthey from Baird.

[David Manthey:]

Hi, good morning, guys. How are you? Well, I wanted to ask you about the Bin stock or the FMI initiatives historically, when you've come out with initiatives like vending or on site, or CSP, or whatever; you've outlined some of the key aspects of the strategy. And this one seems fairly significant. Just wondering, can you share any margin metrics or how you view the TAM to help us visualize the long-term opportunity of the Bin stock or this FMI initiative?

[Dan Florness:]

One, I just, I think I'll add a little bit of, I think of the FMI vending, FMI vend component that is really a non fastener thing. And close to 50% of the revenue is on through vending is a safety product. So as we were evolving through that go back to earlier part of the last decade, we were having most discussions about what that meant from a mix standpoint. If I think of the FMI bin, and then I think of the FMI, excuse me, Fast Bin and Fast Stock. Fast Bin especially the RFID component of that is built in a lot of cases that might be in a production environment, where it's a current month system in the net, bin is empty, you throw in a tub of above your shelf, and it tells us you have an empty bin. So it's pretty basic technology. If you think about it that way, resilient technology, that's probably more production environments. So that probably has a gross margin profile. That's more akin to the vending, if I think of it from the standpoint of FMI, the third piece, Fast Stock. That's a lot of MRO or a nice mix of MRO. And so that's probably and it's very fastener centered. And so that has a margin that's more like the fastener piece. Does that helped, Dave?

[David Manthey:]

Yes, it does. I guess you've outlined these pie charts that should give us an idea of where you think you're headed in terms of revenues. And yes, that does help in terms of the profitability. So we'll talk at offline.

[Dan Florness:]

Yes. The other piece I'll point out is the best part about Fast Bin, and Fast Stock is it's a labor efficiency, it's productivity, because that's business we want to go after, allows us to go after that with the best cost structure. Because that's been a really critical part of our path the last five years, and it's going to be a critical part of our path for the next five years. Holden, you would like --

[Holden Lewis:]

Yes, and I might contribute this to that, I get asked a lot. What is the gross margin of a vending machine? My answer is often a vending machine doesn't have a gross margin, it really depends on the product that's vended, and what margin comes with that product. And I would think about the Fast Bin the same way, I don't think the Bin has an inherent margin; it depends on what is being stored in that bin. And so when we think about the bins, we've always had Fast stock, which has been heavily oriented towards fasteners. And so you would argue that that bin has a fastener type of margin, what we believe will happen, in addition to the efficiencies that Dan talked about in terms of the fulfillment process, we think that these Fast Bin will actually lend themselves to our being able to be more involved with other lines outside of fasteners, power transmission and fluid power come to mind, for instance. And so, we've always done fasteners in these bins, we'll continue to fasteners in these bins, and we will continue to do fasteners in these bins. We will the benefits and efficiencies for fulfillment. We'll certainly try to leverage that in even more market share in fasteners, we've always done that, but to the extent that we can use Fast Bin to get into some of our other nine product verticals, a little bit more deeply. Those verticals will typically have a lower gross margin than fasteners, and they'll probably be more consistent with our non fastener business, which is in that sort of low to mid-40s type of range.

[Operator:]

Our next question is coming from Chris Dankert from Longbow Research.

[Christopher Dankert:]

Hey, good morning, guys. Thanks for taking my question. I guess first off, just thinking about FMI again, to kind of further pull that thread, we're talking about increasing labor efficiency, just any additional benefit that you guys could supposedly call out on working capital in 2021 from that initiative?

[Dan Florness:]

For Fast Bin, with the Fast bins?

[Christopher Dankert:]

Yes, if you're increasing inventory turn, just kind of is there any explicit benefit to working capital there?

[Dan Florness:]

Yes, probably don't want to get ahead of ourselves and what that means for 2021, because it's still going to be, it's still something new and to be honest with you the only reason -- when we started vending years ago, we didn't start talking about it till we were about three years into it. And here, we're actually talking about it when we're about a year into it. And the other reason being is because in some cases where we would have put a vending machine in the past, I think we'll put some bins in now, because we now have a better suite of products because we own the underlying technology. And it improves our ability to bring the most efficient tool to bear. We talked in previous calls about what we call our LIFT concept, local inventory, fulfillment terminal. And really, what that's about is perhaps, sometimes the best place to stock product and the pick product is in the local branch or on site. Sometimes where to do put that product is in the regional distribution center. And in really what we're doing with LIFT is something we talked about years ago is supporting vending, with maybe a third type of distribution, and that's the fulfillment terminal. We're just, what's going in that vending machine is what's in that little LIFT facility. And we're managing it there and we're able to strip, these are high frequency turnover products, we're able to strip some of that out of our branch and rake it into LIFT facility, which is from a labor standpoint more efficient. But from a working capital standpoint incredibly attractive over time. We have nine LIFT facilities that are operating at the end of the year. We're still just touching a really, really small percentage of our vending devices. I think we're touching about 2,500 right now. And our goal is to double that LIFT from nine operating at the end of this year to 18 at the end of next year. We'll still be even with our optimistic projections, still touching a relatively small number of vending devices at the end of the year, but it's ever growing. And that that will work some working capital out, but it's still on a relatively small base, that logic equally applies to Fast Bin and Fast Stock.

[Holden Lewis:]

And what I will contribute to that is if you think about the core value add that fastener brings to our customers, it's our being able to go to them and say, look, today you have 100 widgets on the shelf, because we're better at managing the supply chain. Because what we do, we can reduce those 100 widgets to 80 widgets. Now those 80 widgets will probably include some safety stock from our perspective, because we want to make sure that we don't shut the customer down and we need to make sure that we go and we check those bins and check those machines et cetera. And so those 80 widgets are an improvement. But when you think about what Fast Bin can do in terms of informing us in real time about need, it's possible that those 80 widgets can be 75 because we're much more aware of -- and of what the quantities on hand are. I agree with Dan, I think 2021 is far too early to talk about what the impact of this is on working capital. This is the first year we're really aggressively commercializing what we've built and worked on. But I mean, intuitively, if we market this correctly, and I think we will, there should be some benefit over time to working capital from the efficiencies it brings to the fulfillment.

[Christopher Dankert:]

Understood. And does it make sense just very briefly, to follow up, when I look at 2Q obviously a lot of noise from some of the surge sales. Does it make sense to kind of benchmark, 2Q EBIT margin on 2Q 2019? Is that how we should really be thinking about it? It sounds like kind of in your prepared remarks, how you're trying to walk people there a bit?

[Dan Florness:]

Well, I'll answer that this way. It's the way we spoke at our virtual leadership meeting back in December, and it's centered on our government business, which was a huge recipient of a lot of these COVID type certain sales. Our government business historically is a relatively small part of our business about 4%. In the second quarter, it surged over 10% of our business. And I don't know what the final number was for the year, but it was -- for most of the year on a year-to-date basis was up over 100% year-over-year. And so when we come into the year like 2021, so what do we talk about it internally is, okay, normally that business, which is still at a young business; we would expect it to grow, say 20% a year. So when we're looking at second quarter of 2021, for our government business, we're saying to our teams, ignore your year-over-year numbers, because all that matters right now is where are we in January and where are we building to in September and October. And then what does that mean for 2022. But in the case of the second quarter, as an example, take your 2019 Q2 numbers, if you're in the government, if you're leading our government team, add to it the 20%, we would have expected in Q2, 2020, ignoring the COVID thing, and then add another 20% to it for 2021. So 2019 plus 2020, 20 plus 20, 20%, twice over. And that's where your head should be on where you're growing to going to be in the second quarter. And that's going to be a negative number for government in the second quarter, unless there's a different way to do math. And then the challenge to them is because of the broader exposure, we received in the marketplace and the fact that more government customers know about us, and the only area where our onsite signings accelerated in 2020 over 2019 was with government customers, the rest of the world you saw our overall numbers. And does that 20 plus 20 contemplates the fact that more people want to buy from us or more people are aware of us and maybe that second 20 can become a 25 or 30? I don't know. But that's the way we're thinking about it.

[Holden Lewis:]

Yes, and I would say also, it as much as 2020 is an unusual year from a traditional seasonality standpoint, when you think about full year numbers and how the quarter is played out. I would expect 2021 to be more traditional from a seasonality standpoint, depending on what your sort of outlook is for the macro economy. Maybe it's a little stronger in the back half than in the front half. I don't know your call. But, I think that, what you're probably ultimately going to do is build out your annual expectations. And if you think about the traditional seasonality of our business, that'll probably allow you to back into the answer.

[Operator:]

Your next question is coming from Ryan Merkel from William Blair.

[Ryan Merkel:]

Hey, guys, two questions for me. So first off construction was still pretty slow. What's the outlook there? And then on pricing, it looks like prices were flat this quarter. What are you expecting for price increases in 2021, for both product and freight?

[Dan Florness:]

As it relates to construction, I wish I had different color to give you that I have the last few months, which is to say that conditions are still soft, but the expectations continue to improve. So if I think about heading into 2021, my expectation for construction is still that the weakness that we're seeing today is beginning to be remedied through projects coming back on the board and things like that. And that results in better results in 2021 than what we saw in 2020. That would be my expectation. But yes, at least at this point, it's still fairly soft. So we'll see, obviously comps play a role in that but from the feedback from the regions, for the most part, they're talking about seeing some improvement in the overall tenor of the construction market. So I'm waiting like you guys are to see that actually translate in the numbers.

[Holden Lewis:]

Don't lose perspective, one element of our construction is there is a tethered to oil and gas.

[Dan Florness:]

Yes, absolutely. And that remains probably soft, though again, there too I think that is regionals are sort of eyeing that Q2 is perhaps being a period where you might start seeing some strength there. So we'll see. I would say that's pricing, but and then on the pricing side, yes, I would say the pricing was not meaningfully different in Q4 as it has been the last couple of quarters. I would say going forward, the question really is going to relate to what happens to material costs and we have seen an uptick in steel. I think many of you have talked about that very same dynamic and if that continues or persists then I would anticipate that we would have to take some sort of action to mitigate that. So, right now, we're not taking broad pricing actions. We're certainly doing things from a tactical standpoint, as we did to some degree with some of the safety products. But if the trends continue on steel the way that they've begun or ended, I guess, ended 2021. Sorry, ended 2020, then, I would anticipate that we'd have to take some actions as you roll into the end of Q1 and into Q2 to mitigate that effect.

[Operator:]

The next question today is coming from Josh Pokrzywinski from Morgan Stanley.

[Josh Pokrzywinski:]

Hi, good morning, guys. Just a follow up on the price cost question, I guess, really over the past three or four years, I don't know if we've been in what you would call a normal pricing environment, especially with tariffs kind of flying in a couple years ago. Any reason to believe that this will be anything but a normal pricing cycle in terms of your ability to offset it, kind of evenness to the market? I know, it's still early, Holden, and you talked about, maybe later this quarter, that we are all hitting the road on that, and even put those out there in the market. But anything you're seeing so far, whether it's competitively or from your suppliers, that would indicate this is something beyond kind of the longer term historical framework for pricing or price cost.

[Holden Lewis:]

I don't think so. Obviously conditions around tariffs were unique. If we get into a situation where pricing is necessary because of more ECON101 variables, like, steel prices going up and things like that, I think that we would be able to address that in the same manner that we've addressed it historically. The only difference, I would say, is that the structure that we've put in place internally to analyze and act on, where cost increases are happening. I think we're in a far better place today than we were pre-tariff. I think that tariff really prompted us to shore up the technologies that we use, the analytics that we use, and the internal structure and personnel that we rely on to make us more effective with that. So I haven't seen any changes to the market dynamics, I think that our internal dynamics are in a better position today than even was the case two years ago, pre-tariff.

[Josh Pokrzywinski:]

Got it. That's helpful. And then just related to kind of the Fastenal captive fleet. Is there a point at which the absorption benefit from kind of keeping those folks busy or again, or keeping those assets busy or, starts to level off and what's normal? Because I know, on the way down or in software patches, you talk about the deleveraging there, but at what point does that kind of get back to normal, whether that's number of points of growth or a dollar number, any way you would conceptualize it to think about that dynamic.

[Dan Florness:]

I think that we're like any other industrial company or cyclical company, I guess, in the sense that when conditions are somewhat soft, that's a bit of a challenge, and you under absorb certain of your structure. A captive fleet is part of that, but rightfully so is manufacturing, so is our purchasing, our Asian purchasing, et cetera, right. So when demand is weak, that you tend to deleverage. Now this is an odd year because you look at our revenue, our demand was weak, but a lot of our demand didn't necessarily run through a lot of our physical structure. There's a lot more direct ship type of business in 2020, than is typical. The sort of opposite side of that is if demand begins to go up begins to improve. And that improvement is impacting the core of our business, which is our field sales and our branches and taking advantage of the business that we've built over 50 plus years, then we're going to leverage those assets. And so part of the, I think, part of the answer to your question is what do you expect next year in terms of industrial production growth and market growth, if you believe that we're going to be growing next year, then I would expect the 2021 we would be leveraging and we would be getting some benefit from that as in contrast to what we saw in 2020. So I think that it depends heavily on what your expectations for underlying market growth is. But there's no ceiling where that becomes more difficult. I don't think so. Because I'm wrestling with what that ceiling is right. I mean we have a certain amount that we invest in manufacturing. We have a certain amount that we invest in our fleet. And other elements of our infrastructure that, if we see demand begin to get better, I would expect that you might see increases in that but at the same rate, that demand grows. And so we would leverage it. So I don't know that I see a ceiling in that.

[Holden Lewis:]

There's some dynamics in there, we took out a truck a day of service earlier in the year, when that truck is filled again, or is overfilled. And we need to add another day of distribution, another truck service to that branch. That's something we've been doing for years. And so that that grows with it, that the challenge for us is we did a really nice job in 2020 when we pulled that truck service out. We didn't see our third party spend go up because we needed some service that wasn't there. And our team did a great job with that. We need to keep that reined in as well as we go into 2021. And I feel we're better poised to do than we have historically because we have better tracking information. We've deployed a lot of new technology over the last few years in order to continue to deploy it. And one of those is better illuminating what's where in our system. Just like when you ship a small parcel, you never know exactly where it is in a given point in time. We're getting better at those ourselves. The only other nuance that probably introduces I mean, yes, we are cyclical; we're viewed within investing circles as a cyclical play company. Remember that we don't have anywhere near the amount of fixed costs in our gross profit, or I guess in our cost of goods as say an average manufacturer does, right. So does our leverage and deleverage work the same way? Yes, it does. Does it have the same order of magnitude on the upside or the downside as an average manufacturer does? No, we tend to be a little bit more muted in that regard. But it behaves the same way as your classic cyclical.

[Operator:]

Our next question is coming from Hamzah Mazari from Jefferies.

[Hamzah Mazari:]

Hey, Happy New Year. Thanks for taking my question. My question is largely around what do you think the impact is on a vaccine rollout to your business? Clearly, there's a lot of moving parts, maybe you can speak to it qualitatively. Safety maybe slows, but, maybe that helps gross margin, maybe the sales cycle accelerates onsite, just any thoughts as to, vaccine impact on the business, thank you.

[Dan Florness:]

Well, I think the biggest thing is the markers I talked about our growth drivers improve because the market has stated to us. And they stated to us from the standpoint of our success, they stated to us, we liked this onsite model, we liked this vending and bins. And in fast stock model, we like it a lot. We're just nervous about change right now. We're worried about what's happening in the next eight hours, two weeks, two months; we're more worried about that than we are about strategically improving our business because we don't have that luxury. And we don't want to invite new rescue and have you move in. And so I think it would manifest itself in the fact that our pipeline that would expand and you would see a resumption of the goals we talked, the targets we talked about onsite signings, and vending, signings, et cetera. And again, those are markers to engagement with our customer. That's where we'd see it, I think you'd see the underlying economy improve because people, let's face it, we all, we already tired of this. We want to get back to something that's closer to normal and retains. There's a whole bunch of things that we learned in the last 10 months that frankly, would have taken us years to accomplish. But the necessity is the mother of invention. And we invented a lot in the last 10 months as a society. And there's a whole bunch of things that are positive coming out of it. Perhaps that makes our whole society a little bit better.

[Holden Lewis:]

Yes, I could use it. And I might contribute maybe a little bit of perspective, right? Because I know that everybody's very concerned about if things normalize, that we're going to lose all that safety business, we don't lose all of it, lose some of it. But let's not lose sight of the fact that as much as everybody is concerned about safety, not growing at 116%. We look at and we say fasteners were down almost 20 in the same period of time. If COVID gets resolved, we may -- we have that tough comp in safety but we have really easy comps in everything that's not safety which is a bigger part of our mix, right? People might be concerned about our market share gains and safety, and government if COVID normalized, but it didn't do as well on signings because of it. And so we might lose one, but we gained the other. I think if you stand back from the specifics and look at the overall results for the year, it was, actually I think Dan and I both used in some writings, it was kind of a boring year, or an unremarkable year if you step back and don't think about the specifics and just look at our results. And that combines remarkable performance in safety, terrible performance because the market in non safety and if COVID gets resolved, that flips, and that's how -- that's the perspective out an offer.

[Dan Florness:]

With that, Ellen, we're almost on the hour. Again, thank you for joining us. I would share one closing thought. I've talked in the past about the pride that that we all feel. And I hope you as shareholders feel in the Blue Team, and what we were able to accomplish in 2020. I'm also quite proud of the trust that was part of that and important ingredients of that with our customer and our supplier because we had to communicate like crazy and have trust throughout that supply chain that we could pull some stuff off. And I'll share an example of tomorrow is an important milestone for us. It was a year ago on January 21; we did something we'd never done after conversations with one of our trusted suppliers, company upriver called 3M. We locked down in our network N95 masks respirators because of what we were learning from our team in China from our supplier base. We locked it down that we'd never done that before. And we did it with some really crude tools. We just basically shut off our request system for one part for several part numbers. But it was all about trust between what our supplier would, could do and what our customer believed us, the supplier and Fastenal can do to support them. Thanks, everybody. Have a good day. Thank you.

[Operator:]

Thank you. That concludes the teleconference. You may disconnect your line at this time. And have a wonderful day. We thank you for your participation today.