Expeditors Reports Third Quarter 2023 EPS of $1.16
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.
11/07/2023 - 08:30 AM
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.
_______________________
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 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
_______________
1 Directly related cost of transportation and other expenses totals Operating Expenses from Airfreight services, Ocean freight and ocean services and Customs brokerage and other services as shown in the Condensed Consolidated Statements of Earnings.
2 Salaries and other operating expenses totals Salaries and related, Rent and occupancy, Depreciation and amortization, Selling and promotion and Other as shown in the Condensed Consolidated Statements of Earnings. In the three months ended September 30, 2023, includes $14 million of expense related to indirect tax and other contingencies.
3 Operating 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.
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.