Expeditors Reports Third Quarter 2023 EPS of $1.16

Rhea-AI Summary

Expeditors International of Washington, Inc. (NASDAQ:EXPD) reported a significant decrease in financial performance for the third quarter of 2023 compared to the same period in 2022, with diluted net earnings per share down 54%, net earnings down 59%, operating income down 59%, and revenues down 50%. Airfreight and ocean container volumes also decreased by 14% and 15%, respectively. The company attributes these declines to a deceleration in demand, soft rates, and excess capacity in the shipping industry, as well as ongoing economic uncertainty and geopolitical instability.

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

• Diluted Net Earnings Attributable to Shareholders per share (EPS¹) decreased 54% to $1.16
• Net Earnings Attributable to Shareholders decreased 59% to $171 million
• Operating Income decreased 59% to $216 million
• Revenues decreased 50% to $2.2 billion
• Airfreight tonnage volume decreased 14% and ocean container volume decreased 15%

“As expected, the deceleration in demand that we have seen since the second half of 2022 continued in the comparable third quarter of 2023,” said Jeffrey S. Musser, President and Chief Executive Officer. “Additionally, rates generally remained soft while capacity exceeded demand in most lanes. The shipping industry has been undergoing a great unwinding of so many of the drivers that led up to the massive mismatch of supply and demand that occurred during the pandemic. As a result, air and ocean capacity is now mostly plentiful and at rates that remain well below the pandemic period. We have also experienced declines in the number of customs brokerage transactions we handled, even as we benefited from lower costs resulting from the gradual clearing of pandemic-related port congestion. In addition, shippers continue to pivot back to ocean freight to reduce costs in an uncertain economy. We have seen shippers generally move smaller volumes in a marketplace that is defined by inflation, high energy costs, an increasingly tentative consumer, and now significant and growing geopolitical uncertainty.

“While we have been through many industry cycles of expansion and contraction before, the pace and extent of this unwinding has been as unpredictable and disruptive as the dislocations that drove our market to such unprecedented peaks in pricing and volumes. We are meeting these conditions head-on and have been re-balancing operations for an environment that is now more like the way things were prior to the COVID disruptions. We have made very deliberate efforts to control costs and to carefully manage our headcount; we do not know how long this cycle of cautious demand and soft rates will last in this uncertain economic environment. While not all markets are soft and rates have even increased in certain lanes, we have yet to see signs of a widespread improvement in rates. Nevertheless, we are encouraged by indications that tonnage and volumes are perhaps flattening or improving. While we continue to adjust for the current environment, we also need to be prepared for the longer term when pricing and capacity conditions stabilize and demand begins to consistently trend higher.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “As the market recalibrates, we are encouraged that both tonnage and volumes increased from the June quarter, marking the first sequential quarterly growth in both tons and volumes since the third quarter of 2022. So long as the economic environment remains uncertain, we will continue to focus on aligning headcount and overhead expenses commensurate with our transactions and volumes. We remain dedicated to improving efficiency, while also preparing for the time when demand shows signs of a sustained recovery. Since December 31, we have decreased headcount by 8%. We also continue to be very mindful of our strong cash position, having now returned more than $2 billion to shareholders in repurchased stock and dividends over the past 12 months.”

Mr. Powell noted that other overhead expenses increased $18 million in the quarter, primarily a result of $14 million in expenses related to indirect tax and other contingencies, compared to a recovery of $11 million in the third quarter of 2022 of costs incurred earlier that year as a result of the February 2022 cyber-attack.

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 indications that tonnage and volumes are perhaps flattening or improving; our uncertain short-term outlook; a normalized supply chain; shippers pivoting from air freight to ocean freight; falling rates that remain well below the pandemic period; declining volumes; plentiful and in some cases excess air and ocean capacity; shipper uncertainty given the current economic outlook; rising inflation, energy 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 control our headcount and exert other efforts to align our costs; our ability to re-balance operations for an environment that is now more like the way things were prior to the COVID disruptions; our ability to improve our efficiency; 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. Third Quarter 2023 Earnings Release, November 7, 2023 Financial Highlights for the three months ended September 30, 2023 and 2022 (Unaudited) (in 000's of US dollars except share data)
		Three months ended September 30,										Nine months ended September 30,
		2023				2022				% Change		2023				2022				% Change
Revenues		$	2,190,001			$	4,362,146			(50)%		$	7,022,342			$	13,629,756			(48)%
Directly related cost of transportation and other expenses 1		$	1,402,111			$	3,194,273			(56)%		$	4,540,396			$	10,151,332			(55)%
Salaries and other operating expenses 2		$	571,821			$	640,950			(11)%		$	1,741,411			$	1,983,759			(12)%
Operating income 3		$	216,069			$	526,923			(59)%		$	740,535			$	1,494,665			(50)%
Net earnings attributable to shareholders		$	171,353			$	414,209			(59)%		$	594,164			$	1,138,123			(48)%
Diluted earnings attributable to shareholders per share		$	1.16			$	2.54			(54)%		$	3.92			$	6.84			(43)%
Basic earnings attributable to shareholders per share		$	1.16			$	2.56			(55)%		$	3.95			$	6.90			(43)%
Diluted weighted average shares outstanding			148,001				163,250						151,619				166,398
Basic weighted average shares outstanding			147,099				162,029						150,543				164,944
_______________
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. In the three months ended September 30, 2023, includes $14 million of expense related to indirect tax and other contingencies.
3Operating income in the three months ended September 30, 2022 includes recoveries of $18 million of expense related to 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 nine months ended September 30, 2022, operating income includes $70 million in expenses incurred as a result of the cyber-attack. In the three and nine months ended September 30, 2023, amounts related to the cyber-attack recorded in Operating Income were insignificant.

During the three and nine months ended September 30, 2023, we repurchased 2.6 million and 10.5 million shares of common stock at an average price of $116.29 and $113.97 per share. During the three and nine months ended September 30, 2022 we repurchased 4.5 million and 9.5 million shares of common stock at an average price of $103.56 and $106.84 per share.

		Employee Full-time Equivalents as of
		September 30, 2023				December 31, 2022				September 30, 2022
North America			6,975				7,778				7,819
Europe			3,811				4,228				4,167
North Asia			2,290				2,448				2,485
South Asia			1,709				1,851				1,843
Middle East, Africa and India			1,440				1,540				1,538
Latin America			753				859				852
Information Systems			1,239				1,173				1,144
Corporate			408				425				421
Total			18,625				20,302				20,269

		Third quarter year-over-year percentage decrease in:
2023		Airfreight kilos		Ocean freight FEU
July		(15)%		(14)%
August		(15)%		(15)%
September		(12)%		(17)%
Quarter		(14)%		(15)%

_______________
Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on November 10, 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)
		September 30, 2023				December 31, 2022
Assets:
Current Assets:
Cash and cash equivalents		$	1,639,428			$	2,034,131
Accounts receivable, less allowance for credit loss of $5,724 at September 30, 2023 and $9,466 at December 31, 2022			1,458,983				2,107,645
Deferred contract costs			223,768				257,545
Other			189,737				118,696
Total current assets			3,511,916				4,518,017
Property and equipment, less accumulated depreciation and amortization $579,961 at September 30, 2023 and $567,758 at December 31, 2022			480,924				501,916
Operating lease right-of-use assets			506,981				507,503
Goodwill			7,927				7,927
Deferred federal and state income taxes, net			50,796				37,449
Other assets, net			19,577				17,622
Total assets		$	4,578,121			$	5,590,434
Liabilities:
Current Liabilities:
Accounts payable		$	846,461			$	1,108,996
Accrued liabilities, primarily salaries and related costs			423,685				479,262
Contract liabilities			283,797				323,101
Current portion of operating lease liabilities			99,876				95,621
Federal, state and foreign income taxes			13,226				47,075
Total current liabilities			1,667,045				2,054,055
Noncurrent portion of operating lease liabilities			419,602				422,844
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, none issued			—				—
Common stock, par value $0.01 per share. Issued and outstanding: 145,386 shares at September 30, 2023 and 154,313 shares at December 31, 2022			1,454				1,543
Additional paid-in capital			—				139
Retained earnings			2,701,386				3,310,892
Accumulated other comprehensive loss			(213,060	)			(202,553	)
Total shareholders’ equity			2,489,780				3,110,021
Noncontrolling interest			1,694				3,514
Total equity			2,491,474				3,113,535
Total liabilities and equity		$	4,578,121			$	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 September 30,								Nine months ended September 30,
		2023				2022				2023				2022
Revenues:
Airfreight services		$	724,331			$	1,480,955			$	2,380,405			$	4,682,076
Ocean freight and ocean services			560,281				1,684,579				1,851,389				5,420,471
Customs brokerage and other services			905,389				1,196,612				2,790,548				3,527,209
Total revenues			2,190,001				4,362,146				7,022,342				13,629,756
Operating Expenses:
Airfreight services			516,519				1,104,812				1,707,568				3,459,861
Ocean freight and ocean services			387,670				1,343,355				1,277,159				4,345,963
Customs brokerage and other services			497,922				746,106				1,555,669				2,345,508
Salaries and related			412,505				499,341				1,290,911				1,546,503
Rent and occupancy			58,387				52,715				174,224				155,241
Depreciation and amortization			15,607				15,187				46,374				42,416
Selling and promotion			6,149				6,239				18,847				16,174
Other			79,173				67,468				211,055				223,425
Total operating expenses			1,973,932				3,835,223				6,281,807				12,135,091
Operating income			216,069				526,923				740,535				1,494,665
Other Income (Expense):
Interest income			17,156				7,835				53,723				12,447
Interest expense			(1,601	)			(470	)			(4,641	)			(1,031	)
Other, net			267				568				9,035				8,762
Other income, net			15,822				7,933				58,117				20,178
Earnings before income taxes			231,891				534,856				798,652				1,514,843
Income tax expense			61,048				120,694				206,018				368,975
Net earnings			170,843				414,162				592,634				1,145,868
Less net (losses) earnings attributable to the noncontrolling interest			(510	)			(47	)			(1,530	)			7,745
Net earnings attributable to shareholders		$	171,353			$	414,209			$	594,164			$	1,138,123
Diluted earnings attributable to shareholders per share		$	1.16			$	2.54			$	3.92			$	6.84
Basic earnings attributable to shareholders per share		$	1.16			$	2.56			$	3.95			$	6.90
Weighted average diluted shares outstanding			148,001				163,250				151,619				166,398
Weighted average basic shares outstanding			147,099				162,029				150,543				164,944

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES   Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)
		Three months ended September 30,								Nine months ended September 30,
		2023				2022				2023				2022
Operating Activities:
Net earnings		$	170,843			$	414,162			$	592,634			$	1,145,868
Adjustments to reconcile net earnings to net cash from operating activities:
Provisions for losses on accounts receivable			1,411				5,570				2,316				9,917
Deferred income tax benefit			(6,418	)			(3,070	)			(7,942	)			(14,928	)
Stock compensation expense			15,879				14,175				46,962				51,296
Depreciation and amortization			15,607				15,187				46,374				42,416
Other, net			2,673				1,435				6,396				144
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable			(53,722	)			634,421				629,205				880,364
Increase (decrease) in accounts payable and accrued liabilities			40,919				(350,922	)			(311,990	)			(343,902	)
(Increase) decrease in deferred contract costs			(56,917	)			226,087				28,870				437,155
Increase (decrease) in contract liabilities			74,701				(249,895	)			(33,549	)			(488,826	)
Decrease in income taxes payable, net			(4,017	)			(31,397	)			(97,743	)			(78,568	)
(Increase) decrease in other, net			(10,979	)			(5,369	)			(6,695	)			2,040
Net cash from operating activities			189,980				670,384				894,838				1,642,976
Investing Activities:
Purchase of property and equipment			(7,993	)			(15,928	)			(28,600	)			(68,498	)
Other, net			10				(590	)			(209	)			(645	)
Net cash from investing activities			(7,983	)			(16,518	)			(28,809	)			(69,143	)
Financing Activities:
Payments on borrowings on lines of credit			(1,491	)			(21,117	)			(33,636	)			(29,601	)
Proceeds from borrowings on lines of credit			8,404				—				26,953				56,545
Proceeds from issuance of common stock			61,841				61,885				80,305				73,318
Repurchases of common stock			(298,103	)			(469,041	)			(1,199,294	)			(1,018,106	)
Dividends Paid			—				—				(102,263	)			(109,828	)
Payments for taxes related to net share settlement of equity awards			—				—				(19,501	)			(19,333	)
Distribution to noncontrolling interest			—				(543	)			—				(543	)
Net cash from financing activities			(229,349	)			(428,816	)			(1,247,436	)			(1,047,548	)
Effect of exchange rate changes on cash and cash equivalents			(11,807	)			(47,487	)			(13,296	)			(100,443	)
Change in cash and cash equivalents			(59,159	)			177,563				(394,703	)			425,842
Cash and cash equivalents at beginning of period			1,698,587				1,976,971				2,034,131				1,728,692
Cash and cash equivalents at end of period		$	1,639,428			$	2,154,534			$	1,639,428			$	2,154,534
Taxes Paid:
Income taxes		$	61,603			$	150,960			$	306,059			$	465,711

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 September 30, 2023:
Revenues		$	784,503				106,293				47,327				515,340				207,006				410,904				119,849				(1,221	)			2,190,001
Directly related cost of transportation and other expenses1		$	421,432				63,671				28,409				398,681				145,292				263,524				81,643				(541	)			1,402,111
Salaries and other operating expenses2		$	261,323				38,275				16,405				66,546				42,138				120,436				27,351				(653	)			571,821
Operating income (loss)		$	101,748				4,347				2,513				50,113				19,576				26,944				10,855				(27	)			216,069
Identifiable assets at period end		$	2,572,404				200,711				110,708				512,746				217,018				726,729				260,619				(22,814	)			4,578,121
Capital expenditures		$	3,762				302				84				168				409				1,369				1,899				—				7,993
Equity		$	1,797,123				46,264				54,096				225,229				91,712				154,617				161,882				(39,449	)			2,491,474
For the three months ended September 30, 2022:
Revenues		$	1,244,515				140,622				68,057				1,489,331				518,780				637,411				264,518				(1,088	)			4,362,146
Directly related cost of transportation and other expenses1		$	742,826				80,116				41,638				1,250,872				416,817				453,248				209,248				(492	)			3,194,273
Salaries and other operating expenses2		$	314,442				30,151				15,057				98,758				37,577				109,308				36,181				(524	)			640,950
Operating income		$	187,247				30,355				11,362				139,701				64,386				74,855				19,089				(72	)			526,923
Identifiable assets at period end		$	3,553,279				272,527				137,472				915,895				421,148				1,020,756				322,160				(35,711	)			6,607,526
Capital expenditures		$	9,278				556				419				581				426				3,619				1,049				—				15,928
Equity		$	2,430,632				129,346				59,494				304,496				180,855				289,595				140,147				(43,172	)			3,491,393

		UNITED STATES				OTHER NORTH AMERICA				LATIN AMERICA				NORTH ASIA				SOUTH ASIA				EUROPE				MIDDLE EAST, AFRICA AND INDIA				ELIMI- NATIONS				CONSOLI- DATED
For the nine months ended September 30, 2023:
Revenues		$	2,535,945				326,398				151,994				1,607,788				631,001				1,386,284				386,524				(3,592	)			7,022,342
Directly related cost of transportation and other expenses1		$	1,387,511				201,984				90,139				1,238,996				437,392				924,592				261,482				(1,700	)			4,540,396
Salaries and other operating expenses2		$	785,282				108,892				52,172				205,976				132,984				373,004				85,003				(1,902	)			1,741,411
Operating income		$	363,152				15,522				9,683				162,816				60,625				88,688				40,039				10				740,535
Identifiable assets at period end		$	2,572,404				200,711				110,708				512,746				217,018				726,729				260,619				(22,814	)			4,578,121
Capital expenditures		$	15,829				932				360				1,110				744				6,688				2,937				—				28,600
Equity		$	1,797,123				46,264				54,096				225,229				91,712				154,617				161,882				(39,449	)			2,491,474
For the nine months ended September 30, 2022:
Revenues		$	3,751,102				390,220				191,900				4,840,822				1,776,355				1,871,509				811,147				(3,299	)			13,629,756
Directly related cost of transportation and other expenses1		$	2,303,428				230,154				118,793				4,054,319				1,463,173				1,335,267				647,510				(1,312	)			10,151,332
Salaries and other operating expenses2		$	962,817				86,328				42,654				326,767				121,634				333,971				111,481				(1,893	)			1,983,759
Operating income		$	484,857				73,738				30,453				459,736				191,548				202,271				52,156				(94	)			1,494,665
Identifiable assets at period end		$	3,553,279				272,527				137,472				915,895				421,148				1,020,756				322,160				(35,711	)			6,607,526
Capital expenditures		$	45,149				2,672				705				1,878				1,152				13,343				3,599				—				68,498
Equity		$	2,430,632				129,346				59,494				304,496				180,855				289,595				140,147				(43,172	)			3,491,393
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/20231106262562/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 Expeditors International of Washington, Inc.'s financial results for the third quarter of 2023?

Expeditors International of Washington, Inc. reported a significant decrease in financial performance for the third quarter of 2023 compared to the same period in 2022, with diluted net earnings per share down 54%, net earnings down 59%, operating income down 59%, and revenues down 50%.

What factors contributed to the decline in financial performance?

The company attributes the declines to a deceleration in demand, soft rates, and excess capacity in the shipping industry, as well as ongoing economic uncertainty and geopolitical instability.

How is Expeditors International of Washington, Inc. responding to the current market conditions?

The company is focused on aligning headcount and overhead expenses with transactions and volumes, decreasing headcount by 8%, improving efficiency, and maintaining a strong cash position. They are also preparing for a sustained recovery in demand.