Expeditors Reports Second Quarter 2023 EPS of $1.30

Business Wire
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SEATTLE, August 08, 2023--(BUSINESS WIRE)--Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced second quarter 2023 financial results including the following comparisons to the same quarter of 2022:

  • Diluted Net Earnings Attributable to Shareholders per share (EPS1) decreased 43% to $1.30

  • Net Earnings Attributable to Shareholders decreased 48% to $197 million

  • Operating Income decreased 51% to $248 million

  • Revenues decreased 51% to $2.2 billion

  • Airfreight tonnage volume decreased 15% and ocean container volume decreased 13%

"The freight marketplace has continued to reset and has reverted closer to pre-pandemic levels of activity," said Jeffrey S. Musser, President and Chief Executive Officer. "Average buy and sell rates in the second quarter are still above their pre-COVID levels but are falling, and volumes have continued to decline at the same time that air capacity has scaled up and ocean capacity is readily available. Pricing is becoming a more critical determining factor to shippers the further away we get from the severe supply chain disruptions brought on by the pandemic, which impacted revenues this quarter, primarily in our air and ocean businesses. There is now ample and, in some cases, excess capacity in both air and ocean freight, as global supply chain congestion of recent years has effectively disappeared.

"With the return of passenger belly space, total air cargo capacity now exceeds pre-pandemic levels. Driven by robust passenger demand, carriers continue to bring new and idled aircraft back into service, which is coupled with persistent higher utilization of freighter capacity compared to pre-pandemic levels. Despite increased air capacity, shippers face uncertain demand for their products, as consumers remain cautious amidst declines in their purchasing power. In that regard, second-quarter operating conditions were very much a continuation of what we experienced in the immediately prior two quarters.

"Ocean buy and sell rates also have continued to fall significantly for the third consecutive quarter as capacity exceeded demand despite carrier efforts to rationalize the availability of space. Our customs brokerage fees and Transcon revenue also were lower due to declines in volumes.

"Looking forward, we will continue to thoughtfully manage down our headcount and exert other efforts to align our costs with these lower levels of demand. In many ways, current conditions are very much the reverse of what we experienced in the early days of the pandemic, as the current marketplace shifts to a lower gear on increased capacity and falling rates and demand. We do not see those conditions changing meaningfully before the end of the current year. Shippers are cautious, the economy remains uncertain, and carrier capacity does not adequately reflect the current levels of marketplace demand."

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, "It is critical that while we keep costs in check, we also prepare ourselves for the future when operating conditions eventually stabilize and demand and volumes begin to recover and grow. While focused on controlling and carefully managing our cash, we still were able to return $1 billion to shareholders in repurchased stock and dividends paid out during the first six months of the year, and more than $2.1 billion over the past 12 months. While our first priority always is to invest in the growth of our business, we will continue to focus on controlling costs, improving operational efficiencies, and returning capital to investors as we have done for more than 40 years."

Expeditors is a global logistics company headquartered in Seattle, Washington. The Company employs trained professionals in 176 district offices and numerous branch locations located on six continents linked into a seamless worldwide network through an integrated information management system. Services include the consolidation or forwarding of air and ocean freight, customs brokerage, vendor consolidation, cargo insurance, time-definite transportation, order management, warehousing and distribution and customized logistics solutions.

_______________________

1Diluted earnings attributable to shareholders per share.

NOTE: See Disclaimer on Forward-Looking Statements in this release.

Disclaimer on Forward-Looking Statements:

Certain statements contained in this news release are "forward-looking statements," based on management’s views with respect to future events and underlying assumptions that involve risks and uncertainties. These forward-looking statements include statements regarding our uncertain short-term outlook; a normalized supply chain; increased air capacity due to robust passenger demand; falling rates; declining volumes; sufficient and in some cases excess air and ocean capacity; shipper uncertainty given the current economic outlook; rising inflation and financing costs; and signs of a slowing economy and drop in demand. Future financial performance could differ materially because of factors such as: our ability to thoughtfully manage down our headcount and exert other efforts to align our costs; our ability to predict when operating conditions may eventually stabilize and demand and volumes begin to recover and grow; our ability to leverage the strength of our carrier relationships; the strength of our non-asset-based operating model; our ability to align expenses with revenues and to enhance our productivity; our ability to maintain our existing accounts and gain new business; our ability to invest in our strategic efforts to explore new areas for profitable growth; and our ability to remain a strong, healthy, unified and resilient organization. The normalizing of the supply chain at the end of the pandemic, along with the current uncertainty in the global economy, could have the effect of heightening many of the other risks described in Item 1A of our Annual Report on Form 10-K, including, without limitation, those related to the success of our strategy and desire to maintain historical unitary profitability, our ability to attract and retain customers, our ability to manage costs, interruptions to our information technology systems, the ability of third-party providers to perform and potential litigation as updated by our reports on Form 10-Q, filed with the Securities and Exchange Commission. These and other factors are discussed in the Company’s regulatory filings with the Securities and Exchange Commission, including those in "Item 1A. Risk Factors" of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and the Company’s most recent Form 10-Q. The forward-looking statements contained in this news release speak only as of this date and the Company does not assume any obligation to update them except as required by law.

Expeditors International of Washington, Inc.

Second Quarter 2023 Earnings Release, August 8, 2023

Financial Highlights for the three months ended June 30, 2023 and 2022 (Unaudited)

(in 000's of US dollars except share data)

Three months ended June 30,

Six months ended June 30,

2023

2022

% Change

2023

2022

% Change

Revenues

$

2,239,752

$

4,603,312

(51)%

$

4,832,341

$

9,267,610

(48)%

Directly related cost of transportation and other expenses 1

$

1,419,183

$

3,440,948

(59)%

$

3,138,285

$

6,957,059

(55)%

Salaries and other operating expenses 2

$

572,072

$

656,382

(13)%

$

1,169,590

$

1,342,809

(13)%

Operating income 3

$

248,497

$

505,982

(51)%

$

524,466

$

967,742

(46)%

Net earnings attributable to shareholders

$

196,800

$

377,805

(48)%

$

422,811

$

723,914

(42)%

Diluted earnings attributable to shareholders per share

$

1.30

$

2.27

(43)%

$

2.75

$

4.31

(36)%

Basic earnings attributable to shareholders per share

$

1.31

$

2.29

(43)%

$

2.78

$

4.35

(36)%

Diluted weighted average shares outstanding

151,563

166,474

153,516

167,980

Basic weighted average shares outstanding

150,435

165,092

152,291

166,423

_______________________

1Directly related cost of transportation and other expenses totals Operating Expenses from Airfreight services, Ocean freight and ocean services and Customs brokerage and other services as shown in the Condensed Consolidated Statements of Earnings.

2Salaries and other operating expenses totals Salaries and related, Rent and occupancy, Depreciation and amortization, Selling and promotion and Other as shown in the Condensed Consolidated Statements of Earnings.

3Operating income in the three and six months ended June 30, 2022 includes $26 million and $88 million in expenses incurred as a result of the Company's global systems downtime and investigation, recovery and remediation efforts caused by a targeted cyber-attack that occurred in the first quarter of 2022. In the three and six months ended June 30, 2023, amounts related to the cyber-attack recorded in Operating Income were insignificant.

During the three and six months ended June 30, 2023, we repurchased 6.0 million and 8.0 million shares of common stock at an average price of $114.61 and $113.23 per share. During the three and six months ended June 30, 2022 we repurchased 5.0 million shares of common stock at an average price of $109.81.

Employee Full-time Equivalents as of

June 30, 2023

December 31, 2022

June 30, 2022

North America

7,154

7,778

7,770

Europe

3,946

4,228

4,099

North Asia

2,340

2,448

2,488

South Asia

1,731

1,851

1,821

Middle East, Africa and India

1,459

1,540

1,533

Latin America

765

859

854

Information Systems

1,242

1,173

1,093

Corporate

416

425

438

Total

19,053

20,302

20,096

Second quarter year-over-year percentage
increase (decrease) in:

2023

Airfreight
kilos

Ocean freight
FEU

April

(6)%

(15)%

May

(16)%

(13)%

June

(22)%

(12)%

Quarter

(15)%

(13)%

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on August 11, 2023 will be considered in management's 8-K "Responses to Selected Questions."

_______________________

NOTE: See Disclaimer on Forward-Looking Statements in this release.

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

June 30, 2023

December 31, 2022

Assets:

Current Assets:

Cash and cash equivalents

$

1,698,587

$

2,034,131

Accounts receivable, less allowance for credit loss of $5,802 at June 30, 2023 and $9,466 at December 31, 2022

1,423,622

2,107,645

Deferred contract costs

175,723

257,545

Other

184,614

118,696

Total current assets

3,482,546

4,518,017

Property and equipment, less accumulated depreciation and amortization $590,490 at June 30, 2023 and $567,758 at December 31, 2022

494,539

501,916

Operating lease right-of-use assets

514,958

507,503

Goodwill

7,927

7,927

Deferred federal and state income taxes, net

43,550

37,449

Other assets, net

20,520

17,622

Total assets

$

4,564,040

$

5,590,434

Liabilities:

Current Liabilities:

Accounts payable

$

815,514

$

1,108,996

Accrued expenses, primarily salaries and related costs

422,134

479,262

Contract liabilities

218,561

323,101

Current portion of operating lease liabilities

99,962

95,621

Federal, state and foreign income taxes

22,936

47,075

Total current liabilities

1,579,107

2,054,055

Noncurrent portion of operating lease liabilities

426,829

422,844

Commitments and contingencies

Shareholders’ Equity:

Preferred stock, none issued

—

—

Common stock, par value $0.01 per share. Issued and outstanding: 147,222 shares at June 30, 2023 and 154,313 shares at December 31, 2022

1,472

1,543

Additional paid-in capital

—

139

Retained earnings

2,752,461

3,310,892

Accumulated other comprehensive loss

(198,001

)

(202,553

)

Total shareholders’ equity

2,555,932

3,110,021

Noncontrolling interest

2,172

3,514

Total equity

2,558,104

3,113,535

Total liabilities and equity

$

4,564,040

$

5,590,434

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(In thousands, except per share data)

(Unaudited)

Three months ended June 30,

Six months ended June 30,

2023

2022

2023

2022

Revenues:

Airfreight services

$

751,171

$

1,602,566

$

1,656,074

$

3,201,121

Ocean freight and ocean services

593,801

1,759,646

1,291,108

3,735,892

Customs brokerage and other services

894,780

1,241,100

1,885,159

2,330,597

Total revenues

2,239,752

4,603,312

4,832,341

9,267,610

Operating Expenses:

Airfreight services

525,027

1,212,503

1,191,049

2,355,049

Ocean freight and ocean services

405,807

1,402,365

889,489

3,002,608

Customs brokerage and other services

488,349

826,080

1,057,747

1,599,402

Salaries and related

428,558

508,222

878,406

1,047,162

Rent and occupancy

58,205

51,598

115,837

102,526

Depreciation and amortization

15,506

14,254

30,767

27,229

Selling and promotion

6,314

5,887

12,698

9,935

Other

63,489

76,421

131,882

155,957

Total operating expenses

1,991,255

4,097,330

4,307,875

8,299,868

Operating income

248,497

505,982

524,466

967,742

Other Income (Expense):

Interest income

17,792

2,720

36,567

4,612

Interest expense

(395

)

(58

)

(3,040

)

(561

)

Other, net

289

164

8,768

8,194

Other income, net

17,686

2,826

42,295

12,245

Earnings before income taxes

266,183

508,808

566,761

979,987

Income tax expense

70,390

126,582

144,970

248,281

Net earnings

195,793

382,226

421,791

731,706

Less net (losses) earnings attributable to the noncontrolling interest

(1,007

)

4,421

(1,020

)

7,792

Net earnings attributable to shareholders

$

196,800

$

377,805

$

422,811

$

723,914

Diluted earnings attributable to shareholders per share

$

1.30

$

2.27

$

2.75

$

4.31

Basic earnings attributable to shareholders per share

$

1.31

$

2.29

$

2.78

$

4.35

Weighted average diluted shares outstanding

151,563

166,474

153,516

167,980

Weighted average basic shares outstanding

150,435

165,092

152,291

166,423

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three months ended June 30,

Six months ended June 30,

2023

2022

2023

2022

Operating Activities:

Net earnings

$

195,793

$

382,226

$

421,791

$

731,706

Adjustments to reconcile net earnings to net cash from operating activities:

Provisions for (recoveries) losses on accounts receivable

(167

)

4,763

905

4,347

Deferred income tax benefit

(3,560

)

(8,622

)

(1,524

)

(11,858

)

Stock compensation expense

18,595

25,518

31,083

37,121

Depreciation and amortization

15,506

14,254

30,767

27,229

Other, net

2,564

(1,746

)

3,723

(1,291

)

Changes in operating assets and liabilities:

Decrease in accounts receivable

174,321

378,291

682,927

245,943

(Decrease) increase in accounts payable and accrued liabilities

(149,986

)

(133,171

)

(352,909

)

7,020

Decrease in deferred contract costs

18,166

37,138

85,787

211,068

Decrease in contract liabilities

(23,803

)

(45,574

)

(108,250

)

(238,931

)

Increase in income taxes payable, net

(93,817

)

(93,430

)

(93,726

)

(47,171

)

Decrease (increase) in other, net

4,834

(1,001

)

4,284

7,409

Net cash from operating activities

158,446

558,646

704,858

972,592

Investing Activities:

Purchase of property and equipment

(10,481

)

(38,158

)

(20,607

)

(52,570

)

Other, net

(794

)

(134

)

(219

)

(55

)

Net cash from investing activities

(11,275

)

(38,292

)

(20,826

)

(52,625

)

Financing Activities:

Payments on borrowings on lines of credit

(5,743

)

(5,382

)

(32,145

)

(8,484

)

Proceeds from borrowings on lines of credit

7,054

33,953

18,549

56,545

Proceeds from issuance of common stock

9,176

5,682

18,464

11,433

Repurchases of common stock

(687,689

)

(549,065

)

(901,191

)

(549,065

)

Dividends Paid

(102,263

)

(109,828

)

(102,263

)

(109,828

)

Payments for taxes related to net share settlement of equity awards

(12,056

)

(11,851

)

(19,501

)

(19,333

)

Net cash from financing activities

(791,521

)

(636,491

)

(1,018,087

)

(618,732

)

Effect of exchange rate changes on cash and cash equivalents

(7,857

)

(46,518

)

(1,489

)

(52,956

)

Change in cash and cash equivalents

(652,207

)

(162,655

)

(335,544

)

248,279

Cash and cash equivalents at beginning of period

2,350,794

2,139,626

2,034,131

1,728,692

Cash and cash equivalents at end of period

$

1,698,587

$

1,976,971

$

1,698,587

$

1,976,971

Taxes Paid:

Income taxes

$

173,670

$

236,791

$

244,456

$

314,751

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Business Segment Information

(In thousands)

(Unaudited)

UNITED
STATES

OTHER
NORTH
AMERICA

LATIN
AMERICA

NORTH
ASIA

SOUTH
ASIA

EUROPE

MIDDLE
EAST,
AFRICA
AND
INDIA

ELIMI-
NATIONS

CONSOLI-
DATED

For the three months ended June 30, 2023:

Revenues

$

805,948

110,255

49,972

510,027

199,868

440,916

123,972

(1,206

)

2,239,752

Directly related cost of transportation and other expenses1

$

426,121

69,108

29,428

387,973

134,477

288,808

83,890

(623

)

1,419,182

Salaries and other operating expenses2

$

256,277

34,793

16,265

68,290

44,048

125,196

27,820

(616

)

572,073

Operating income (loss)

$

123,550

6,354

4,279

53,764

21,343

26,912

12,262

33

248,497

Identifiable assets at period end

$

2,553,553

192,362

115,458

495,229

213,026

748,449

258,849

(12,886

)

4,564,040

Capital expenditures

$

6,623

161

46

352

168

2,336

795

—

10,481

Equity

$

1,873,220

45,252

59,289

220,638

93,476

146,174

158,133

(38,078

)

2,558,104

For the three months ended June 30, 2022:

Revenues

$

1,265,363

144,988

66,136

1,582,475

611,246

658,307

275,948

(1,151

)

4,603,312

Directly related cost of transportation and other expenses1

$

797,179

85,806

43,298

1,323,354

507,473

464,399

220,162

(723

)

3,440,948

Salaries and other operating expenses2

$

314,726

31,308

14,496

104,896

38,728

115,394

37,258

(424

)

656,382

Operating income

$

153,458

27,874

8,342

154,225

65,045

78,514

18,528

(4

)

505,982

Identifiable assets at period end

$

3,681,137

304,799

144,303

1,275,808

554,166

1,081,246

365,532

(45,849

)

7,361,142

Capital expenditures

$

26,394

1,038

177

766

436

7,666

1,681

—

38,158

Equity

$

2,435,088

127,428

54,762

307,453

217,437

297,572

134,388

(38,865

)

3,535,263

UNITED
STATES

OTHER
NORTH
AMERICA

LATIN
AMERICA

NORTH
ASIA

SOUTH
ASIA

EUROPE

MIDDLE
EAST,
AFRICA
AND
INDIA

ELIMI-
NATIONS

CONSOLI-
DATED

For the six months ended June 30, 2023:

Revenues

$

1,751,442

220,105

104,667

1,092,448

423,995

975,380

266,675

(2,371

)

4,832,341

Directly related cost of transportation and other expenses1

$

966,078

138,313

61,730

840,315

292,100

661,068

179,839

(1,159

)

3,138,284

Salaries and other operating expenses2

$

523,960

70,617

35,767

139,430

90,846

252,568

57,652

(1,249

)

1,169,591

Operating income

$

261,404

11,175

7,170

112,703

41,049

61,744

29,184

37

524,466

Identifiable assets at period end

$

2,553,553

192,362

115,458

495,229

213,026

748,449

258,849

(12,886

)

4,564,040

Capital expenditures

$

12,067

630

276

942

335

5,319

1,038

—

20,607

Equity

$

1,873,220

45,252

59,289

220,638

93,476

146,174

158,133

(38,078

)

2,558,104

For the six months ended June 30, 2022:

Revenues

$

2,506,587

249,598

123,843

3,351,491

1,257,575

1,234,098

546,629

(2,211

)

9,267,610

Directly related cost of transportation and other expenses1

$

1,560,602

150,038

77,155

2,803,447

1,046,356

882,019

438,262

(820

)

6,957,059

Salaries and other operating expenses2

$

648,375

56,177

27,597

228,009

84,057

224,663

75,300

(1,369

)

1,342,809

Operating income

$

297,610

43,383

19,091

320,035

127,162

127,416

33,067

(22

)

967,742

Identifiable assets at period end

$

3,681,137

304,799

144,303

1,275,808

554,166

1,081,246

365,532

(45,849

)

7,361,142

Capital expenditures

$

35,871

2,116

286

1,297

726

9,724

2,550

—

52,570

Equity

$

2,435,088

127,428

54,762

307,453

217,437

297,572

134,388

(38,865

)

3,535,263

1 Directly related cost of transportation and other expenses totals Operating Expenses from Airfreight services, Ocean freight and ocean services and Customs brokerage and other services as shown in the Condensed Consolidated Statements of Earnings.

2 Salaries and other operating expenses totals Salaries and related, Rent and occupancy, Depreciation and amortization, Selling and promotion and Other as shown in the Condensed Consolidated Statements of Earnings.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230807971584/en/

Contacts

Jeffrey S. Musser
President and Chief Executive Officer
(206) 674-3433

Bradley S. Powell
Senior Vice President and Chief Financial Officer
(206) 674-3412

Geoffrey Buscher
Director - Investor Relations
(206) 892-4510

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