Expeditors Reports Second Quarter 2023 EPS of $1.30

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: [e-mail]. 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 expenses^1	$	426,121		69,108		29,428		387,973		134,477		288,808		83,890		(623	)		1,419,182
Salaries and other operating expenses^2	$	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 expenses^1	$	797,179		85,806		43,298		1,323,354		507,473		464,399		220,162		(723	)		3,440,948
Salaries and other operating expenses^2	$	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 expenses^1	$	966,078		138,313		61,730		840,315		292,100		661,068		179,839		(1,159	)		3,138,284
Salaries and other operating expenses^2	$	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 expenses^1	$	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 expenses^2	$	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

^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.