Expeditors Reports Fourth Quarter 2022 EPS of $1.38

Rhea-AI Summary

Expeditors International of Washington (NASDAQ:EXPD) reported significant declines in its fourth quarter 2022 results compared to Q4 2021. Diluted EPS dropped 48% to $1.38, while net earnings fell 52% to $219 million. Revenues decreased by 36% to $3.4 billion, with airfreight tonnage down 20% and ocean container volume down 15%. CEO Jeffrey S. Musser noted a sudden plummet in demand and rates, exacerbated by shippers adapting to inflation and economic uncertainty. Operating income also dropped 47% to $330 million. Despite a robust cash flow of over $2.1 billion in 2022, the company plans to align expenses with revenues amid a challenging landscape.

Positive

• Cash flow from operations exceeded $2.1 billion in 2022.
• Returned $1.8 billion to shareholders via stock repurchases and dividends.

Negative

• Diluted EPS decreased 48% to $1.38.
• Net earnings dropped 52% to $219 million.
• Operating income fell 47% to $330 million.
• Revenues declined 36% to $3.4 billion.
• Airfreight tonnage volume decreased by 20%.
• Ocean container volume decreased by 15%.

SEATTLE--(BUSINESS WIRE)-- Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced fourth quarter 2022 financial results including the following highlights compared to the same quarter of 2021:

• Diluted Net Earnings Attributable to Shareholders per share (EPS¹) decreased 48% to $1.38
• Net Earnings Attributable to Shareholders decreased 52% to $219 million
• Operating Income decreased 47% to $330 million
• Revenues decreased 36% to $3.4 billion
• Airfreight tonnage volume decreased 20% and ocean container volume decreased 15%

“As pandemic-related bottlenecks eased and air and ocean supply/demand imbalances began to dissipate in the first half of the year, average buy and sell rates progressively declined to varying degrees, as they typically do – until they suddenly began to plummet simultaneously and faster than we would have expected in the fourth quarter,” said Jeffrey S. Musser, President and Chief Executive Officer. “The rapid turnaround in Q4 was stunning and unparalleled.”

“Fourth quarter demand also was softer than we would have expected, particularly in retail and high tech,” Musser continued. “Many shippers had stockpiled inventory and pulled orders forward early in 2022, in a concerted effort to avoid the worst of the supply chain bottlenecks that materialized during the pandemic, when abrupt shutdowns and stay-at-home orders transformed how we live and do business. Those conditions, which were already starting to ease throughout the first three quarters of 2022, quickly reversed course as we entered the fourth quarter and shippers swiftly adapted to increased consumer caution and slowing demand for their products, while also battling inflation and tighter financing. We were especially impacted in North Asia, our second largest geography, as the lingering effects of the lockdowns contributed to the largest declines in our air tonnage and ocean volumes in at least a decade.

“I am extremely grateful to our people, who continued to perform at their very best as they have throughout the many significant challenges we have faced over the past couple of years. We recognize that the pandemic tailwind is gone and we are now in a marketplace in which the supply chain appears to have largely normalized. Nevertheless, a level of uncertainty remains and shippers are prioritizing cost controls as they scramble to adapt to an increasingly fragile global economy.

“While we remain very optimistic about the future, our short-term outlook is somewhat uncertain due to a difficult economic environment and the resetting of supply and demand, which has a direct impact on available capacity and pricing. We plan to move forward with a sharp eye on aligning expenses with revenues, particularly over the next one or two quarters. Our focus will be on maintaining our existing accounts and gaining new business, while reducing overall expenses. Just as we quickly configured our operations to accommodate unprecedented chaos and complexity during the pandemic, we now need to address our operations for a post-pandemic environment of soft demand and pressured pricing.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “This quarter was heavily impacted by a rapid reversal from the most robust operating environment we have ever seen. Economic uncertainty, government actions directed at trying to tame inflation, and severe challenges to the global supply chain gave way to sharply decelerating volumes along with a swift and simultaneous falloff in buy/sell rates. Such quickly evolving operating conditions impacted our results for the quarter, as did year-over-year comparisons to strong results in 2021. In addition, earnings before income taxes were impacted by an increase in discretionary field and branch bonuses that were awarded at year-end within our district incentive compensation program, as well as the recording of a non-income tax contingency, which on a combined basis totaled approximately $81 million. Our teams around the world worked well managing through significant challenges in 2022 always with careful attention to cash flow. Our cash flow from operations exceeded $2.1 billion in 2022 and we returned $1.8 billion to shareholders via repurchases of common stock and dividends.”

Mr. Powell noted that the Company’s annual effective tax rate for 2022 was 25.9%, compared to 26.3% in 2021. The fourth quarter of 2022 effective tax rate was 33.1%, compared to 27.5% in the year-ago quarter. The increase is primarily due to a change in the amount of foreign taxes incurred net of available foreign tax credits.

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 optimism regarding the future and our uncertain short-term outlook; a normalized supply chain; softening demand; pressure on buy and sell rates; the continued unsettled operating environment due to uncertain air and ocean capacity; an increasingly fragile global economy; trade disruptions; rising fuels costs; the conflict in Ukraine; inflation, high energy costs, government fiscal and monetary measures, and signs of a slowing economy and drop in demand; and the uneven lifting of the COVID-19 pandemic restrictions around the world. Future financial performance could differ materially because of factors such as: our ability to leverage the strength of our carrier relationships to secure space; the strength of our non-asset-based operating model; our expectation that the supply/demand imbalance, rate volatility, and various on-shore bottlenecks may continue; 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 ongoing impact of the COVID-19 pandemic 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, 2021 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. Fourth quarter 2022 Earnings Release, February 21, 2023 Financial Highlights for the three and twelve months ended December 31, 2022 and 2021 (Unaudited) (in 000's of US dollars except share data)
		Three months ended December 31,										Twelve months ended December 31,
		2022				2021				% Change		2022				2021				% Change
Revenues		$	3,441,528			$	5,396,343			(36)%		$	17,071,284			$	16,523,517			3%
Directly related cost of transportation and other expenses 1		$	2,425,565			$	4,026,748			(40)%		$	12,576,897			$	12,058,155			4%
Salaries and other operating expenses 2		$	686,257			$	746,066			(8)%		$	2,670,016			$	2,556,036			4%
Operating income		$	329,706			$	623,529			(47)%		$	1,824,371			$	1,909,326			(4)%
Net earnings attributable to shareholders		$	219,276			$	452,832			(52)%		$	1,357,399			$	1,415,492			(4)%
Diluted earnings attributable to shareholders per share		$	1.38			$	2.66			(48)%		$	8.26			$	8.27			—
Basic earnings attributable to shareholders per share		$	1.39			$	2.69			(48)%		$	8.33			$	8.37			—
Diluted weighted average shares outstanding			158,535				170,293						164,427				171,250
Basic weighted average shares outstanding			157,269				168,393						163,010				169,145

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.

During the three and twelve months ended December 31, 2022, we repurchased 5.0 million and 14.5 million shares of common stock at an average price of $112.76 and $108.88 per share, respectively. During the three and twelve months ended December 31, 2021, we repurchased 2.3 million and 4.4 million shares of common stock at an average price of $123.71 and $117.54 per share, respectively. In addition, during 2022 and 2021, we paid cash dividends of $1.34 and $1.16 per share, respectively.

		Employee Full-time Equivalents as of December 31,
		2022				2021
North America			7,778				7,613
Europe			4,228				3,961
North Asia			2,448				2,485
South Asia			1,851				1,783
Middle East, Africa and India			1,540				1,504
Latin America			859				833
Information Systems			1,173				994
Corporate			425				415
Total			20,302				19,588

		Fourth quarter year-over-year percentage decrease in:
		Airfreight kilos		Ocean freight FEU
2022
October		(16)%		(11)%
November		(20)%		(15)%
December		(24)%		(19)%
Quarter		(20)%		(15)%

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on February 24, 2023 will be considered in management's 8-K “Responses to Selected Questions.”

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
		December 31, 2022				December 31, 2021
Assets:
Current Assets:
Cash and cash equivalents		$	2,034,131			$	1,728,692
Accounts receivable, less allowance for credit loss of $9,466 and $6,686 at December 31, 2022 and 2021, respectively			2,107,645				3,810,286
Deferred contract costs			257,545				987,266
Other			118,696				108,801
Total current assets			4,518,017				6,635,045
Property and equipment, net			501,916				487,870
Operating lease right-of-use assets			507,503				459,158
Goodwill			7,927				7,927
Deferred federal and state income taxes, net			37,449				729
Other assets, net			17,622				19,200
Total assets		$	5,590,434			$	7,609,929
Liabilities:
Current Liabilities:
Accounts payable		$	1,108,996			$	2,012,461
Accrued expenses, primarily salaries and related costs			479,262				403,625
Contract liabilities			323,101				1,142,026
Current portion of operating lease liabilities			95,621				82,019
Federal, state and foreign income taxes			47,075				86,166
Total current liabilities			2,054,055				3,726,297
Noncurrent portion of operating lease liabilities			422,844				385,641
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, none issued			—				—
Common stock, par value $0.01 per share. Issued and outstanding: 154,313 shares and 167,210 shares at December 31, 2022 and 2021, respectively			1,543				1,672
Additional paid-in capital			139				3,160
Retained earnings			3,310,892				3,620,008
Accumulated other comprehensive loss			(202,553	)			(130,414	)
Total shareholders’ equity			3,110,021				3,494,426
Noncontrolling interest			3,514				3,565
Total equity			3,113,535				3,497,991
Total liabilities and equity		$	5,590,434			$	7,609,929

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)
		Three months ended December 31,								Twelve months ended December 31,
		2022				2021				2022				2021
Revenues:
Airfreight services		$	1,204,810			$	2,293,803			$	5,886,886			$	6,771,402
Ocean freight and ocean services			1,124,088				1,894,759				6,544,559				5,545,818
Customs brokerage and other services			1,112,630				1,207,781				4,639,839				4,206,297
Total revenues			3,441,528				5,396,343				17,071,284				16,523,517
Operating Expenses:
Airfreight services			899,865				1,732,127				4,359,726				5,067,380
Ocean freight and ocean services			842,103				1,505,140				5,188,066				4,364,160
Customs brokerage and other services			683,597				789,481				3,029,105				2,626,615
Salaries and related			509,884				609,449				2,056,387				2,062,351
Rent and occupancy			54,291				48,911				209,532				186,287
Depreciation and amortization			14,922				12,897				57,338				51,312
Selling and promotion			8,119				5,547				24,293				16,026
Other			99,041				69,262				322,466				240,060
Total operating expenses			3,111,822				4,772,814				15,246,913				14,614,191
Operating income			329,706				623,529				1,824,371				1,909,326
Other Income (Expense):
Interest income			13,107				2,211				25,554				8,807
Interest expense			(22,245	)			(312	)			(23,277	)			(411	)
Other, net			480				413				9,243				6,894
Other income (expense), net			(8,658	)			2,312				11,520				15,290
Earnings before income taxes			321,048				625,841				1,835,891				1,924,616
Income tax expense			106,311				171,830				475,286				505,771
Net earnings			214,737				454,011				1,360,605				1,418,845
Less net (losses) earnings attributable to the noncontrolling interest			(4,539	)			1,179				3,206				3,353
Net earnings attributable to shareholders		$	219,276			$	452,832			$	1,357,399			$	1,415,492
Diluted earnings attributable to shareholders per share		$	1.38			$	2.66			$	8.26			$	8.27
Basic earnings attributable to shareholders per share		$	1.39			$	2.69			$	8.33			$	8.37
Weighted average diluted shares outstanding			158,535				170,293				164,427				171,250
Weighted average basic shares outstanding			157,269				168,393				163,010				169,145

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
		Three months ended December 31,								Twelve months ended December 31,
		2022				2021				2022				2021
Operating Activities:
Net earnings		$	214,737			$	454,011			$	1,360,605			$	1,418,845
Adjustments to reconcile net earnings to net cash from operating activities:
Provisions for losses on accounts receivable			1,133				1,512				11,050				7,540
Deferred income tax benefit			(18,312	)			(6,033	)			(33,240	)			(3,690	)
Stock compensation expense			13,101				12,087				64,397				69,385
Depreciation and amortization			14,922				12,897				57,338				51,312
Other, net			1,108				2,267				1,252				3,790
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable			711,977				(491,830	)			1,592,341				(1,869,827	)
(Decrease) increase in accounts payable and accrued expenses			(454,221	)			272,280				(798,123	)			1,041,805
Decrease (increase) in deferred contract costs			277,805				(149,701	)			714,960				(700,273	)
(Decrease) increase in contract liabilities			(309,530	)			168,551				(798,356	)			803,837
Increase (decrease) in income taxes payable, net			23,439				25,845				(55,129	)			57,867
Decrease (increase) in other, net			10,540				3,111				12,580				(12,097	)
Net cash from operating activities			486,699				304,997				2,129,675				868,494
Investing Activities:
Purchase of property and equipment			(18,326	)			(11,447	)			(86,824	)			(36,247	)
Other, net			(245	)			(345	)			(890	)			(398	)
Net cash from investing activities			(18,571	)			(11,792	)			(87,714	)			(36,645	)
Financing Activities:
Payments from borrowing on lines of credit			(688	)			19				(30,289	)			(2,551	)
Proceeds from borrowing on lines of credit			25,211				(75	)			81,756				10,063
Proceeds from issuance of common stock			7,662				6,672				80,980				106,105
Repurchases of common stock			(563,802	)			(289,530	)			(1,581,908	)			(514,594	)
Dividends Paid			(103,971	)			(97,379	)			(213,799	)			(195,766	)
Payments for taxes related to net share settlement of equity awards			(2	)			—				(19,335	)			(15,172	)
Distributions to noncontrolling interest			(1,402	)			—				(1,945	)			(1,631	)
Net cash from financing activities			(636,992	)			(380,293	)			(1,684,540	)			(613,546	)
Effect of exchange rate changes on cash and cash equivalents			48,461				(4,326	)			(51,982	)			(17,402	)
Change in cash and cash equivalents			(120,403	)			(91,414	)			305,439				200,901
Cash and cash equivalents at beginning of period			2,154,534				1,820,106				1,728,692				1,527,791
Cash and cash equivalents at end of period		$	2,034,131			$	1,728,692			$	2,034,131			$	1,728,692
Taxes Paid:
Income taxes		$	100,822			$	147,396			$	566,533			$	442,549

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 December 31, 2022:
Revenues		$	1,118,262				127,442				65,821				969,266				367,679				599,947				194,342				(1,231	)			3,441,528
Directly related cost of transportation and other expenses1		$	639,804				80,052				41,480				799,583				288,014				432,835				144,377				(580	)			2,425,565
Salaries and other operating expenses2		$	(18,767	)			101,864				29,523				178,038				117,024				239,627				39,588				(640	)			686,257
Operating income (loss)		$	497,225				(54,474	)			(5,182	)			(8,355	)			(37,359	)			(72,515	)			10,377				(11	)			329,706
Identifiable assets at period end		$	3,070,697				209,516				123,003				675,022				316,777				938,660				283,872				(27,113	)			5,590,434
Capital expenditures		$	11,262				282				232				1,098				391				4,525				536				—				18,326
Depreciation and amortization		$	9,433				454				280				1,069				472				2,527				687				—				14,922
Equity		$	2,246,417				31,132				56,416				274,703				136,944				263,278				145,269				(40,624	)			3,113,535
For the three months ended December 31, 2021:
Revenues		$	1,337,772				128,240				63,013				2,154,243				740,305				682,819				291,040				(1,089	)			5,396,343
Directly related cost of transportation and other expenses1		$	760,915				70,450				39,072				1,824,159				615,659				485,732				231,171				(410	)			4,026,748
Salaries and other operating expenses2		$	300,474				33,033				15,908				160,862				58,360				135,422				42,682				(675	)			746,066
Operating income		$	276,383				24,757				8,033				169,222				66,286				61,665				17,187				(4	)			623,529
Identifiable assets at period end		$	3,699,748				265,872				122,327				1,587,659				572,980				1,089,963				350,843				(79,463	)			7,609,929
Capital expenditures		$	7,596				549				171				594				595				1,599				343				—				11,447
Depreciation and amortization		$	7,476				439				270				1,269				508				2,333				602				—				12,897
Equity		$	2,599,804				111,952				41,743				224,765				140,129				294,348				123,598				(38,348	)			3,497,991

		UNITED STATES				OTHER NORTH AMERICA				LATIN AMERICA				NORTH ASIA				SOUTH ASIA				EUROPE				MIDDLE EAST, AFRICA AND INDIA				ELIMI- NATIONS				CONSOLI- DATED
For the twelve months ended December 31, 2022:
Revenues		$	4,869,364				517,662				257,721				5,810,088				2,144,034				2,471,456				1,005,489				(4,530	)			17,071,284
Directly related cost of transportation and other expenses1		$	2,943,232				310,206				160,273				4,853,902				1,751,187				1,768,102				791,887				(1,892	)			12,576,897
Salaries and other operating expenses2		$	944,050				188,192				72,177				504,805				238,658				573,598				151,069				(2,533	)			2,670,016
Operating income		$	982,082				19,264				25,271				451,381				154,189				129,756				62,533				(105	)			1,824,371
Identifiable assets at period end		$	3,070,697				209,516				123,003				675,022				316,777				938,660				283,872				(27,113	)			5,590,434
Capital expenditures		$	56,411				2,954				937				2,976				1,543				17,868				4,135				—				86,824
Depreciation and amortization		$	35,461				1,892				1,123				4,682				1,966				9,640				2,574				—				57,338
Equity		$	2,246,417				31,132				56,416				274,703				136,944				263,278				145,269				(40,624	)			3,113,535
For the twelve months ended December 31, 2021:
Revenues		$	4,344,825				440,226				209,161				6,363,054				2,046,569				2,258,911				865,509				(4,738	)			16,523,517
Directly related cost of transportation and other expenses1		$	2,491,947				245,842				125,940				5,295,612				1,666,792				1,558,705				675,303				(1,986	)			12,058,155
Salaries and other operating expenses2		$	1,019,236				123,147				57,779				515,703				204,574				494,760				143,581				(2,744	)			2,556,036
Operating income		$	833,642				71,237				25,442				551,739				175,203				205,446				46,625				(8	)			1,909,326
Identifiable assets at period end		$	3,699,748				265,872				122,327				1,587,659				572,980				1,089,963				350,843				(79,463	)			7,609,929
Capital expenditures		$	19,527				983				471				1,786				2,057				9,507				1,916				—				36,247
Depreciation and amortization		$	29,826				1,780				1,079				5,047				1,965				9,228				2,387				—				51,312
Equity		$	2,599,804				111,952				41,743				224,765				140,129				294,348				123,598				(38,348	)			3,497,991

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.

In 2022, certain intercompany fees were billed to our subsidiaries in the 4^th quarter covering the entirety of 2022. This resulted in fourth quarter operating losses or reduced operating income for some of our business segments when compared to the prior year as in 2021 these amounts were billed monthly.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230220005285/en/

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

Source: Expeditors International of Washington, Inc.

FAQ

What were Expeditors' Q4 2022 earnings results?

Expeditors reported a 48% decrease in diluted EPS to $1.38 and a 52% decline in net earnings to $219 million.

What contributed to the decline in revenue for Expeditors in Q4 2022?

Revenue decreased 36% to $3.4 billion, influenced by reduced airfreight and ocean container volumes amid softer market demand.

How did Expeditors' cash flow perform in 2022?

The company achieved over $2.1 billion in cash flow from operations for the year.

What challenges did Expeditors face in the fourth quarter?

The company faced sudden declines in demand and buy/sell rates, coupled with economic uncertainties and inflation pressures.

What is Expeditors' outlook following Q4 2022 results?

The company noted a somewhat uncertain short-term outlook due to soft demand and pricing pressures, focusing on aligning expenses with revenues.