Expeditors Reports Second Quarter 2022 EPS Of $2.27

Rhea-AI Summary

Expeditors International of Washington (NASDAQ:EXPD) reported a robust second quarter of 2022, with diluted EPS rising 23% to $2.27 and net earnings increasing 19% to $378 million. Operating income surged 23% to $506 million, while revenues climbed 28% to $4.6 billion. Despite these financial gains, airfreight tonnage and ocean container volumes fell 17% and 11%, attributed to a cyber-attack recovery and decreased demand due to economic conditions and lockdowns in China. The CEO emphasized ongoing market uncertainties affecting logistics operations.

Positive

• EPS increased by 23% to $2.27.
• Net earnings rose by 19% to $378 million.
• Operating income grew by 23% to $506 million.
• Revenues surged by 28% to $4.6 billion.
• Returned $659 million to shareholders through stock repurchases and dividends.

Negative

• Airfreight tonnage volume decreased by 17%.
• Ocean container volume dropped by 11%.
• Operational challenges remain due to ongoing port congestion and equipment shortages.
• Unpredictability from COVID restrictions in China and the Ukraine conflict challenges global shipping.

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

• Diluted Net Earnings Attributable to Shareholders per share (EPS¹) increased 23% to $2.27
• Net Earnings Attributable to Shareholders increased 19% to $378 million
• Operating Income increased 23% to $506 million
• Revenues increased 28% to $4.6 billion
• Airfreight tonnage volume and ocean container volume decreased 17% and 11%, respectively

“This was the strongest second quarter in our company’s history, even while our air and ocean volumes were soft compared to a year ago,” said Jeffrey S. Musser, President and Chief Executive Officer. “During the second quarter we continued the recovery from the February cyber-attack and re-established digital connections with many of our customers, which limited our ability to move cargo through our systems. We also experienced a significant drop in volumes in China due to the various lockdowns that resulted in factories not operating and cargo being unavailable to ship. We believe the volume changes are primarily related to timing of our recovery from the cyber-attack, our significant market presence in China, as well as a slowing economy and an overall drop in demand. We simply cannot say enough about the quality of our employees and their commitment to our customers over the last couple of years. Our experiences during the pandemic and recovery from the cyber-attack have tested the will of our staff, as well as the strength and commitment of our service providers and customers.

“Looking at the current environment, our perspective is that there is a great deal of uncertainty in the marketplace. Buy and sell rates have come down from their peaks but remain elevated and out of balance by historical standards. We see signs that the global economy has started to slow and that capacity is no longer severely constrained relative to demand that has also come down from earlier peaks. Nevertheless, airline belly capacity in many markets has not bounced back and we continued to access additional capacity by using air charters to meet shipper demand. Ocean transit times continued to be stretched by port congestion and many ongoing shortages of equipment, labor, and warehousing space. Various onshore bottlenecks further impacted many of our ocean and air lanes, in addition to affecting our customs business due to record high drayage, storage, delivery, demurrage, and detention costs at destination. We do not see signs that these conditions are likely to improve significantly any time soon. The unpredictability of COVID restrictions and lockdowns in China, as well as route restrictions and sanctions from the Ukraine conflict, continue to make global shipping a highly challenging business right now. But the strength of our organization and culture is in bringing order to chaos to service the needs of our customers by accessing capacity and delivering solutions despite the many disruptions.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “All of our products performed well during the quarter and we returned $659 million to shareholders in repurchased stock and dividends. Given the current economic uncertainty and government actions aimed at taming inflation, along with the ongoing challenges throughout the global supply chain, we believe that rates will continue to be highly volatile at least through the end of the year, while generally continuing to trend downwards from their highs over the longer-term. We are no strangers to uncertainty and remain highly disciplined and focused on our customers’ need for capacity and solutions. We will continue to explore ways to further enhance our already strong efficiencies as we continue to adapt to the current operating environment.”

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.

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 the financial and operational impact of the cyber-attack; the future stabilization of supply/demand imbalance and rate volatility; the continued unsettled operating environment due to uncertain air and ocean capacity; volatile air and ocean pricing and uneven demand for such services; port congestion; equipment imbalances; labor shortages; insufficient warehouse and pier space; trade disruptions; rising fuels costs; the conflict in Ukraine; 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 are unlikely to improve any time soon; our ability to fully re-open our offices for return-to-work; our ability to continue to enhance our productivity; our ability to invest in our strategic efforts to explore new areas for profitable growth; our ability to avoid another material cyber-attack; 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. Second Quarter 2022 Earnings Release, August 2, 2022 Financial Highlights for the three and six months ended June 30, 2022 and 2021 (Unaudited) (in 000's of US dollars except per share data)
		Three months ended June 30,											Six months ended June 30,
		2022				2021				% Change			2022				2021				% Change
Revenues		$	4,603,312			$	3,609,093			28%			$	9,267,610			$	6,807,913			36%
Directly related cost of transportation and other expenses1		$	3,440,948			$	2,598,633			32%			$	6,957,059			$	4,845,917			44%
Salaries and other operating expenses2		$	656,382			$	599,815			9%			$	1,342,809			$	1,165,836			15%
Operating income		$	505,982			$	410,645			23%			$	967,742			$	796,160			22%
Net earnings attributable to shareholders		$	377,805			$	316,372			19%			$	723,914			$	603,592			20%
Diluted earnings attributable to shareholders per share		$	2.27			$	1.84			23%			$	4.31			$	3.52			22%
Basic earnings attributable to shareholders per share		$	2.29			$	1.87			22%			$	4.35			$	3.57			22%
Diluted weighted average shares outstanding			166,474				171,677			(3)%				167,980				171,660			(2)%
Basic weighted average shares outstanding			165,092				169,210			(2)%				166,423				169,140			(2)%

__________________________________
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.

Financial Impact of the Cyber-Attack

In the three and six months ended June 30, 2022, the Company incurred, as a result of our inability to timely process and move shipments through ports, approximately $22 million and $62 million, respectively, in incremental demurrage charges, where the Company has direct liability for this obligation. These costs are recorded in customs brokerage and other services expenses.

Additionally, principally in the first quarter, the Company incurred investigation, recovery, and remediation expenses, including costs to recover its operational and accounting systems and to enhance cybersecurity protections. These costs are primarily comprised of various consulting services including cybersecurity experts, outside legal advisors, and other IT professional expenses. The Company also recorded estimated liabilities for potential shipment-related claims. Total amounts recorded for the items above for the three and six months ended June 30, 2022 were approximately $6 million and $28 million, respectively, and are reported in other operating expenses. The Company does not expect to incur significant capital expenditures as a result of the cyber-attack.

The Company may incur additional expenses which could include third-party expenses, incremental information services costs, legal fees, or indemnities to customers or business partners. When the Company’s operating systems were down, many customers worked with other providers to meet their logistics needs, resulting in lower shipment volumes in the first quarter and to a lesser extent in the second quarter for which the financial impact on revenues and operating income cannot be quantified. Such costs and the ongoing impacts from the down time caused by the cyber-attack could have a further material adverse impact on the Company’s business, revenues, expenses, results of operations, cash flows and reputation. The Company is unable to estimate the ultimate direct and indirect financial impacts of this cyber-attack.

		Employee Full-time Equivalents as of June 30,
		2022				2021
North America			7,752				6,949
Europe			4,127				3,700
North Asia			2,490				2,416
South Asia			1,824				1,671
Middle East, Africa and India			1,543				1,496
Latin America			853				781
Information Systems			1,093				968
Corporate			414				399
Total			20,096				18,380

		Second quarter year-over-year percentage decrease:
2022		Airfreight kilos			Ocean freight FEU
April		(24)%			(13)%
May		(13)%			(11)%
June		(13)%			(10)%
Quarter		(17)%			(11)%

During the three and six months ended June 30, 2022, we repurchased 5 million shares of common stock at $109.81 per share. During the three and six months ended June 30, 2021, we repurchased 0.5 million and 1.4 million shares of common stock at an average price of $124.94 and $104.20 per share, respectively.

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on August 5, 2022 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)
		June 30, 2022				December 31, 2021
Assets:
Current Assets:
Cash and cash equivalents		$	1,976,971			$	1,728,692
Accounts receivable, less allowance for credit loss of $7,636 at June 30, 2022 and $6,686 at December 31, 2021			3,469,833				3,810,286
Deferred contract costs			745,577				987,266
Other			137,768				108,801
Total current assets			6,330,149				6,635,045
Property and equipment, less accumulated depreciation and amortization of $554,252 at June 30, 2022 and $541,677 at December 31, 2021			495,328				487,870
Operating lease right-of-use assets			491,630				459,158
Goodwill			7,927				7,927
Deferred federal and state income taxes, net			19,413				729
Other assets, net			16,695				19,200
Total assets		$	7,361,142			$	7,609,929
Liabilities:
Current Liabilities:
Accounts payable			1,914,979				2,012,461
Accrued liabilities, primarily salaries and related costs			473,644				403,625
Contract liabilities			867,467				1,142,026
Current portion of operating lease liabilities			88,112				82,019
Federal, state and foreign income taxes			66,864				86,166
Total current liabilities			3,411,066				3,726,297
Noncurrent portion of operating lease liabilities			414,813				385,641
Commitments and contingencies			—				—
Shareholders’ Equity:
Preferred stock, none issued			—				—
Common stock, par value $0.01 per share. Issued and outstanding: 162,931 shares at June 30, 2022 and 167,210 shares at December 31, 2021			1,629				1,672
Additional paid-in capital			137				3,160
Retained earnings			3,717,316				3,620,008
Accumulated other comprehensive loss			(193,834	)			(130,414	)
Total shareholders’ equity			3,525,248				3,494,426
Noncontrolling interest			10,015				3,565
Total equity			3,535,263				3,497,991
Total liabilities and equity		$	7,361,142			$	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 June 30,								Six months ended June 30,
		2022				2021				2022				2021
Revenues:
Airfreight services		$	1,602,566			$	1,523,569			$	3,201,121			$	2,849,484
Ocean freight and ocean services			1,759,646				1,098,550				3,735,892				2,052,462
Customs brokerage and other services			1,241,100				986,974				2,330,597				1,905,967
Total revenues			4,603,312				3,609,093				9,267,610				6,807,913
Operating Expenses:
Airfreight services			1,212,503				1,136,328				2,355,049				2,090,872
Ocean freight and ocean services			1,402,365				862,251				3,002,608				1,604,686
Customs brokerage and other services			826,080				600,054				1,599,402				1,150,359
Salaries and related			508,222				481,186				1,047,162				933,291
Rent and occupancy			51,598				45,366				102,526				90,646
Depreciation and amortization			14,254				12,675				27,229				25,662
Selling and promotion			5,887				3,172				9,935				6,242
Other			76,421				57,416				155,957				109,995
Total operating expenses			4,097,330				3,198,448				8,299,868				6,011,753
Operating income			505,982				410,645				967,742				796,160
Other Income (Expense):
Interest income			2,720				2,188				4,612				4,134
Other, net			106				2,649				7,633				5,649
Other income, net			2,826				4,837				12,245				9,783
Earnings before income taxes			508,808				415,482				979,987				805,943
Income tax expense			126,582				98,508				248,281				201,019
Net earnings			382,226				316,974				731,706				604,924
Less net earnings attributable to the noncontrolling interest			4,421				602				7,792				1,332
Net earnings attributable to shareholders		$	377,805			$	316,372			$	723,914			$	603,592
Diluted earnings attributable to shareholders per share		$	2.27			$	1.84			$	4.31			$	3.52
Basic earnings attributable to shareholders per share		$	2.29			$	1.87			$	4.35			$	3.57
Weighted average diluted shares outstanding			166,474				171,677				167,980				171,660
Weighted average basic shares outstanding			165,092				169,210				166,423				169,140

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,
		2022				2021				2022				2021
Operating Activities:
Net earnings		$	382,226			$	316,974			$	731,706			$	604,924
Adjustments to reconcile net earnings to net cash from operating activities:
Provisions for losses on accounts receivable			4,763				1,090				4,347				2,289
Deferred income tax (benefit) expense			(8,622	)			1,850				(11,858	)			10,001
Stock compensation expense			25,518				30,909				37,121				42,094
Depreciation and amortization			14,254				12,675				27,229				25,662
Other, net			(1,746	)			346				(1,291	)			897
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable			378,291				(410,783	)			245,943				(663,697	)
(Decrease) increase in accounts payable and accrued expenses			(133,171	)			99,944				7,020				333,182
Decrease (increase) in deferred contract costs			37,138				(150,382	)			211,068				(221,640	)
(Decrease) increase in contract liabilities			(45,574	)			174,504				(238,931	)			254,094
Decrease in income taxes payable, net			(93,430	)			(47,994	)			(47,171	)			(1,356	)
(Increase) decrease in other, net			(1,001	)			1,164				7,409				(324	)
Net cash from operating activities			558,646				30,297				972,592				386,126
Investing Activities:
Purchase of property and equipment			(38,158	)			(6,539	)			(52,570	)			(14,930	)
Other, net			(134	)			138				(55	)			104
Net cash from investing activities			(38,292	)			(6,401	)			(52,625	)			(14,826	)
Financing Activities:
Proceeds from borrowing on lines of credit, net			28,571				174				48,061				89
Proceeds from issuance of common stock			5,682				22,711				11,433				42,468
Repurchases of common stock			(549,065	)			(62,472	)			(549,065	)			(148,469	)
Dividends paid			(109,828	)			(98,387	)			(109,828	)			(98,387	)
Payments for taxes related to net share settlement of equity awards			(11,851	)			(13,893	)			(19,333	)			(15,168	)
Net cash from financing activities			(636,491	)			(151,867	)			(618,732	)			(219,467	)
Effect of exchange rate changes on cash and cash equivalents			(46,518	)			8,699				(52,956	)			(5,503	)
Change in cash and cash equivalents			(162,655	)			(119,272	)			248,279				146,330
Cash and cash equivalents at beginning of period			2,139,626				1,793,393				1,728,692				1,527,791
Cash and cash equivalents at end of period		$	1,976,971			$	1,674,121			$	1,976,971			$	1,674,121
Taxes Paid:
Income taxes		$	236,791			$	143,959			$	314,751			$	190,536

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, 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
For the three months ended June 30, 2021:
Revenues		$	997,567				101,465				46,981				1,309,382				417,718				544,949				192,186				(1,155	)			3,609,093
Directly related cost of transportation and other expenses1		$	566,882				59,311				25,952				1,086,641				335,219				376,856				148,290				(518	)			2,598,633
Salaries and other operating expenses2		$	241,121				31,300				14,735				106,812				49,046				123,408				34,026				(633	)			599,815
Operating income		$	189,564				10,854				6,294				115,929				33,453				44,685				9,870				(4	)			410,645
Identifiable assets at period end		$	2,972,363				196,558				102,296				1,114,475				377,370				929,706				291,406				(31,003	)			5,953,171
Capital expenditures		$	2,905				64				72				400				532				2,100				466				—				6,539
Equity		$	2,163,114				80,802				36,316				318,111				146,583				255,006				128,148				(44,429	)			3,083,651
		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, 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
For the six months ended June 30, 2021:
Revenues		$	1,872,957				195,582				91,845				2,518,430				767,484				1,011,282				352,692				(2,359	)			6,807,913
Directly related cost of transportation and other expenses1		$	1,069,517				112,361				52,652				2,054,170				605,163				683,765				269,399				(1,110	)			4,845,917
Salaries and other operating expenses2		$	479,819				57,037				27,112				213,732				92,211				232,863				64,301				(1,239	)			1,165,836
Operating income		$	323,621				26,184				12,081				250,528				70,110				94,654				18,992				(10	)			796,160
Identifiable assets at period end		$	2,972,363				196,558				102,296				1,114,475				377,370				929,706				291,406				(31,003	)			5,953,171
Capital expenditures		$	5,930				186				125				757				1,111				5,654				1,167				—				14,930
Equity		$	2,163,114				80,802				36,316				318,111				146,583				255,006				128,148				(44,429	)			3,083,651

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220801005770/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 the Q2 2022 earnings results for Expeditors (EXPD)?

In Q2 2022, Expeditors reported an EPS of $2.27, net earnings of $378 million, and revenues of $4.6 billion.

How much did Expeditors return to shareholders in Q2 2022?

Expeditors returned $659 million to shareholders in the form of stock repurchases and dividends.

What factors contributed to the drop in airfreight and ocean container volumes for Expeditors?

The drop in volumes was primarily due to recovery from a cyber-attack and decreased demand resulting from economic slowdowns and lockdowns in China.

What is the outlook for Expeditors in the current market environment?

Expeditors expects high volatility in rates due to ongoing economic uncertainties and challenges in the global supply chain.