Results
Daily sales increased 15.5% year-over-year, primarily driven by share gains with larger customers, pricing actions, and broad-based demand across core end markets.
3Operating margin was 21.5%, a 90 basis point improvement y ear-over-year , as selling, general, and administrative expense leverage more than offset customer mix-related gross margin pressure.
Operating cash flow was $422 million, representing 105% of net income , reflecting the timing of working capital changes associated with strong sales growth.
Capital return
Returned $328 million to shareholders through dividends and share repurchases, representing 82% of net income.
Management commentary
Continued progress on strategic initiatives , including increased sales effectiveness through key account wins, expansion of digital technologies, and deeper penetration through new customer site growth.
Results
PERFORMANCE SUMMARY
QUARTERLY RESULTS OF OPERATIONS
Sales
7Net sales increased $330.0, or 15.5%, in the third quarter of 2026 when compared to the third quarter of 2025 (both periods had the same number of business days).
Sales performance reflects the contribution from improved customer contract signings since the first quarter of 2024 , product pricing, and a modest improvement in industrial production in the first nine months of 2026.
Foreign exchange rates negatively impact ed sales growth by approximately 10 basis points in the third quarter of 2026 as compared to the third quarter of 2025 when foreign exchange rates contributed approximately 10 basis points to sales growth.
The impact of product pricing on net sales in the third quarter of 2026 wa s an increase of approximately 240 basis points, compared to an increase of 240 to 270 basis points in the third quarter of 2025.
Management commentary
Beginning in the fourth quarter of 2025, we expanded our reporting to provide a more comprehensive view of direct (original equipment manufacturing/production) and indirect (maintenance, repair, and operations/facilities maintenance) business across product categories.
Direct materials generally include products incorporated into finished goods or that directly support customers' production processes, while indirect materials support customers' facility operations, maintenance, and safety needs .
During the third quarter of 2026, direct materials outpaced indirect materials, reflecting greater contribution from fastener sales and continued strength with manufacturing customers.
Results
The DS R change when compared to the same period in the prior year and the percent of sales in the period were as follows:
Management commentary
From an end market standpoint, we have four categories: heavy manufacturing, other manufacturing, non-residential construction, and other, the latter of which includes reseller, government/education, transportation, warehousing and storage, and data centers.
Our manufacturing end market growth was mainly due to the relative strength we are experiencing with key account customers with significant managed spend, where our service model and technology are particularly impactful.
The non-residential construction end market experienced growth for the sixth quarter in a row.
Other end market sales were favorably impacted by growth with transportation and reseller customers.
Results
The D SR change when compared to the same period in the prior year and the percent of sales in the period were as follows:
Management commentary
From a customer standpoint, we have two categories: 1) contracts, which include national multi-site, local and regional, and government customers with significant revenue potential, and 2) non-contracts.
Sales with our contract customers continue to outperform as we realize incremental sales from implementing customer signings that we have achieved since the first quarter of 2024.
Non-contract customers tend to be smaller and utilize fewer of our tool s and capabilities, providing fewer avenues for share gains and therefore more closely reflect overall business trends.
Results
The DSR change when compared to the same period in the prior year and the percent of sales in the period were as follows:
Customer Sites and Sales Segmentation
Management commentary
We engage customers in the local market by delivering services and solutions within or near the customer's business (Sites).
Sites represent distinct customer locations where we maintain inventory tailored to local demand, supported by our regional distribution networks.
Our strategy prioritizes customer Sites with monthly sales potential of $50,000 or more.
Segmentation by spend level provides insight into the scale and potential of customer relationships served through our network.
The following table summarizes average customer Site counts by monthly spend band and related sales metrics.
Results
Digital Technology
Outlook
We signed 7,484 weighted FASTBin and FASTVend devices in the third quarter of 2026 .
Our goal for weighted FASTBin and FASTVend device signings in 2026 is between 27,000 and 29,000 MEUs (our previous goal was between 28,000 and 30,000 MEUs).Guidance lowered
Management commentary
The second statistic is sales through FMI Technology, which combines the sales through FASTStock, FASTBin, and FASTVend.
A portion of the growth in sales experienced by FMI, particularly FASTStock and FASTBin, reflects the migration of products from less efficient non-digital stocking locations to more efficient, digital stocking locations.
Results
The table below summarizes signings and installations of our FMI devices and sales through our FMI devices, eBusiness (1) tools, and Digital Footprint (2) .
Gross Profit
Gross prof it, as a percentage of net sales, decreased approximately 40 basis points to 44.8% in the third quarter of 2026 from 45.3% in the third quarter of 2025.
1A continued shift in customer mix toward larger customers reduced gross margin by approximately 50 basis points.
While these relationships typically carry lower gross margins, they generate higher absolute profit dollars and are accretive to operating margin through fixed-cost leverage, higher volumes, and operating efficiencies.
8Price/cost reduced gross margin by approximately 30 basis points, an improvement of approximately 10 basis points from the second quarter of 2026.
Gross margin benefited from several factors, including direct sourcing savings, supplier rebates, and tariff refunds.
Approximately 20 basis points of the benefit reflected favorable timing.
Our gross margin decreased approximately 75 basis points in the second quarter of 2026 to 44.6% of net sales, from 45.3% in the second quarter of 2025.
Gross margin improved from the second quarter of 2026 to the third quarter of 2026.
SG&A Expenses
SG&A expenses, as a percentage of net sales, were 23.3% in the third quarter of 2026 versus 24.6% in the third quarter of 2025, an improvement of 130 basis points.
Employee-related expenses, which typically represent 70% to 75% of total SG&A expenses, improved 90 basis points as a percentage of net sales in the third quarter of 2026 compared to the third quarter of 2025.
Base pay leveraged through increased labor productivity, while bonuses and commissions grew faster than sales as a result of improved business activity and financial performance versus the same period in the prior year.
Occupancy-related expenses, which typically represent 14% to 19% of total SG&A expenses, improved 50 basis points as a percentage of net sales in the third quarter of 2026 compared to the third quarter of 2025 , driven mainly by fixed cost leverage.
Combined, all other SG&A expenses, which typically represent 10% to 15% of total SG&A expenses, increased 10 basis points as a percentage of net sales when compared to the third quarter of 2025.
This slight increase was driven mainly by higher fuel and general insurance expense, partially offset by increased joint marketing efforts with our suppliers.
Operating Income
5Operating income as a percentage of net sales increased to 21.5% in the third quarter of 2026, compared to 20.7% in the third quarter of 2025.
Net Interest
6Net interest income was $0.4 in the third quarter of 2026, compared to net interest expense of $0.9 in the third quarter of 2025, primarily from lower debt balances.
Income Taxes
We recorded income tax expense of $129.6 in the third quarter of 2026, or 24.4% of in com e before income taxes.
Income tax expense was $105.1 in the third quarter of 2025, or 23.9% of income before income tax es.
We believe our ongoing tax rate, absent any discrete tax items or broader changes to tax law, will be approximately 24.6%.
Net Income
4Net income was $401.6 in the third quarter of 2026, an increase of 19.7% compared to the third quarter of 2025.
Diluted net income per share was $0.35 compared to $0.29 in the third quarter of 2025.
CASH FLOW AND BALANCE SHEET
Net cash provided by operating activities was $421.6 in the third quarter of 2026, an increase of 9.0% from the third quarter of 2025.
Cash flow from operations represented 105.0% of net income, compared to 115.3% in the third quarter of 2025 and our five-year third quarter average of 101.1% .
The decline as a percentage of net income compared to last year was primarily driven by a larger use of cash for accounts receivable and inventory, reflecting strong sales growth.
This is a common dynamic for a distribution business.
This was partially offset by higher accounts payable balances mainly attributable to an increase in inventory spending and an increase in accrued expenses related to incentive compensation and customer rebates from improved business performance.
Net cash provided by operating activities was $1,065.7 in the first nine months of 2026, an increase of 14.9% from the first nine months of 2025, representing 94.8% of net income versus 96.2% in the first nine months of 2025 and the most recent five-year average of 96.4%.
The decrease in operating cash flow, as a percent of net income, primarily reflects increased working capital associated with accounts receivable, which was partially offset by inventory efficiencies and higher payable balances due to increased purchasing activity.
The dollar and percentage change in accounts receivable, net, inventories, and accounts payable as of September 30, 2026 when compared to September 30, 2025 were as follows:
Management commentary
The increase in our accounts receivable balance in the third quarter of 2026 was mainly attributable to sales growth, including relative growth with larger customers that tend to carry longer payment terms.
The slight increase in our inventory balance in the third quarter of 2026, despite double-digit sales growth, reflects disciplined inventory management.
The increase in our accounts payable balance in the third quarter of 2026 was mainly attributable to an increase in inventory spending to support growth.
Results
During the third quarter of 2026, our investment in property and equipment, net of proce eds from sales, was $71.8 (2.9% of net sales), which wa s an increase from $54.7 (2.6% of net sales) in the third quarter of 2025.
The investment was directed toward facility construction and upgrades, industrial vending equipment, and information technology (IT) spend.
Our five- a nd ten-year annual average as a percent of net sales was 2.5% and 3.1%, respectively.
Outlook
2For 2026, we continue to expect our investment in property and equipment, net of proceeds from sales, to be between $310.0 and $330.0, an increase from $230.6 in 2025.Guidance raised
The expected growth on a year-over-year basis reflects three items.
First, we expect increased spending to replace our Atlanta hub facility and improve our picking capacity and efficiency across our hub network.
Second, we expect elevated IT spending as projects that were expected in 2025 experienced delays and are expected to continue throughout 2026.
Third, we expect increased trucking spend.
Capital return
During the third quarter of 2026, we retu rned $328.4, or 81.8% of net income, to our shareholders in the form of dividends ($298.2) and share repurchases ($30.2), compared to the third quarter of 2025 when we returned $252.5, or 75.3% of net income, in the form of dividends.
Over the past five years, we have returned an average of 76.0% of net income to shareholders in the third quarter.
Results
Total debt on our balance sheet was $100.0 at the end of the third quarter of 2026, or 2.4% of total capital (the sum of stockholders' equity and total debt), compared to $195.0, or 4.8% of total capital, at the end of the third quarter of 2025.
During the last twelve months, we increased our total full-time equivalent (FTE; based on 40 hours per week) employee headcount by 181.
Our total FTE selling personnel decreased by 82, primarily driven by a drop in hours worked by part-time selling personnel.
We increased our distribution and transportation FTE personnel by 105 to support increased product throughput at our distribution facilities.
We increased our remaining FTE personnel by 158, which related primarily to personnel investments in supply chain support.
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