Expeditors Reports Second Quarter 2023 EPS of $1.30

Rhea-AI Summary

NASDAQ: EXPD - Expeditors International of Washington Announces 2nd Quarter 2023 Financial Results, Revenues Down 51%, Airfreight and Ocean Container Volume Decreased 15% and 13% Respectively

Positive

• The financial results for the second quarter of 2023 show a decrease in diluted net earnings per share by 43% to $1.30, a 48% decrease in net earnings attributable to shareholders, 51% decrease in operating income, and a 51% decrease in revenues compared to the same quarter in 2022. Airfreight tonnage volume decreased by 15% and ocean container volume decreased by 13%. The freight marketplace has continued to reset and has reverted closer to pre-pandemic levels of activity, with average buy and sell rates still above pre-COVID levels but falling, and volumes declining at the same time that air capacity has scaled up and ocean capacity is readily available.
• The return of passenger belly space has led to total air cargo capacity exceeding pre-pandemic levels. Despite increased air capacity, shippers face uncertain demand for their products, as consumers remain cautious amidst declines in their purchasing power. Ocean buy and sell rates have continued to fall significantly for the third consecutive quarter as capacity exceeded demand despite carrier efforts to rationalize the availability of space. Expeditors will continue to manage down headcount and align costs with lower levels of demand, while also focusing on controlling costs, improving operational efficiencies, and returning capital to investors.

Negative

• The financial results indicate a significant decrease in revenues, operating income, and earnings compared to the same quarter in 2022, reflecting the impact of the ongoing shifts in the freight marketplace and the challenges posed by the pandemic. The decline in air and ocean freight volumes and the excess capacity in both air and ocean freight present challenges for the company in the current operating conditions.
• The cautious approach of shippers and the uncertain demand for products due to consumer caution and economic uncertainty are likely to continue to impact the company's performance until the end of the current year.

SEATTLE--(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/

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 are the financial results announced by Expeditors International of Washington for the second quarter of 2023?

The financial results include a 43% decrease in diluted net earnings per share, a 48% decrease in net earnings attributable to shareholders, a 51% decrease in operating income, and a 51% decrease in revenues compared to the same quarter in 2022.

How has the freight marketplace activity changed in the second quarter of 2023?

The freight marketplace has reverted closer to pre-pandemic levels of activity, with average buy and sell rates still above pre-COVID levels but falling, and volumes declining at the same time that air capacity has scaled up and ocean capacity is readily available.

What challenges does Expeditors face in the current operating conditions?

Expeditors faces challenges such as declining air and ocean freight volumes, excess capacity in both air and ocean freight, cautious approach of shippers, and uncertain demand for products due to consumer caution and economic uncertainty.

What is the company's focus for the future?

The company's focus is on managing down headcount, aligning costs with lower levels of demand, controlling costs, improving operational efficiencies, and returning capital to investors.