Jacob Levinson: Okay. That’s helpful color. Thanks. Maybe just switching gears quickly on, I think, maybe in past cycles, FAST would have maybe had trouble holding the margin line and revenue growth at these lower levels. And I guess the question is, structurally, what’s really changed in the business today versus prior cycles and gives you that confidence and maybe being able to have higher incremental margins going forward even if the growth rates aren’t necessarily in this macro backdrop at least, higher.
Dan Florness: Yeah. I think there’s a few things in there. One is, when we came through the tariff period, that was brutal from the standpoint of our pricing tools being so decentralized, communicating what was changing almost on a week-by-week basis was incredibly difficult. And there was one quarter I sat down with our IT — John Soderberg, our leader of IT, and I said, John, I’m going to ask you something that I never — that I told you I’d never ask you to do. We’re going to shut down all IT development for whatever time it takes, and we’re going to focus 100% of our energy on a better pricing tool for our organization to use because this is a disaster we’re going through right now, and we can’t handle these fluctuations because our system isn’t built for that.
And we shut down IT, and we focused on building what we call our price review tool. And then we had other folks in the organization that took that our district managers. We have a key person here in Winona, Kevin Fitzgerald, who took that and created a great tool and our ability to price and pricing isn’t is much about not being too high as it is about not being too low because sometimes if your price isn’t precise and you’re too high, you might actually hurt your margin because you don’t sell enough of that or if you were 3 points lower, you would sell more of it, and it help your margin. So on the gross margin side, we’ve gotten better at our ability to price. And in the recent years, our transportation team has gotten really agile and manage the expense side.
So that’s on the gross margin piece. And there’s a bunch of other things, but I don’t want to give you a 15-minute answer. On the operating expense side, we focused a lot of energy on people development, on leadership development. Earlier when I was talking about the transition with Terry, one of the things that always makes me feel good about transition within Fastenal is the incredible bench of talent we have that exists throughout the organization. It’s from a promote within culture. Because of all that investment, our leadership team, whether it be in a support area, at the district level, at the regional level, our leadership team has never been better. And one thing I’ll credit, especially to Casey Miller, who leads our U.S. business and Jeff Watts, who leads our global business.
They both have done an incredible job over the last five, six years of challenging their leaders to be better at managing the expense side. Because in a decentralized organization, there’s nothing more difficult than that. You have to be out ahead of stuff. And they’ve just done a wonderful job on that. And then the other piece, not displayed anybody, our distribution team and their ability to manage expenses through the cycle is second to none. So as I look at the information I see and I click my ails and I’m like, I can’t believe how good this team is. And I think we’re just better at it. And that’s not about one person. That’s about an organization that’s gotten better over time.
Jacob Levinson: Thank you, both. That’s great color. I’ll pass it on.
Dan Florness: Thanks.
Operator: Thank you. Our next question is coming from Patrick Baumann from JPMorgan. Your line is now live.
Patrick Baumann: All right. Good morning. Thanks for taking my questions. Maybe one for Holden first. Just wanted to follow up on the near-term gross margin expectations. It sounds like the price cost will be favorable year-over-year in the fourth quarter. And then, you also have an easy comp, I think you had called out like weaker product margins last year. Maybe that’s the non-fastener business. I guess just given that and your third quarter performance, are you thinking the gross margin in the fourth quarter is going to be up year-over-year? And then can it also be up maybe from the third quarter as well?
Holden Lewis: No, not up from the third quarter. The first off, I think you have a number of things from Q3 to Q4. The first is, there is seasonality in play. And I think it’s typically, give or take, 30 basis points of seasonality between third quarter and fourth quarter, that’s just proven true over time. It relates to the mix of our business in the fourth quarter, et cetera.
Dan Florness: And the delevering of our trucking network.
