Expeditors Reports Second Quarter 2023 EPS of $1.30
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.
08/08/2023 - 08:30 AM
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.
_______________________
1 Diluted 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
_______________________
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.
3 Operating 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.
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.