10-KPeriod: FY2020

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Annual Report, Year Ended Dec 31, 2020

Filed February 19, 2021For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported strong revenue growth in 2020, driven by unprecedented surges in airfreight rates due to global supply chain disruptions caused by the COVID-19 pandemic. While volumes saw some decline, particularly in ocean freight and customs brokerage due to pandemic-related slowdowns in sectors like aerospace, automotive, and retail, the company benefited significantly from the substantial increase in airfreight sell rates. The company's non-asset-based model allowed for flexibility in adapting to market conditions, though it also led to increased buy rates and operational complexities. Expeditors managed these challenges by utilizing charter flights and navigating volatile market conditions. The company maintained a strong financial position with substantial working capital and no long-term debt, underscoring its resilience amidst global uncertainty. Investors should note the ongoing risks associated with global trade disruptions, carrier stability, and potential future impacts of the pandemic, but the company's strategy and operational flexibility position it to navigate these challenges.

Financial Highlights

44 data points
Beta

Revenue

$9.58B

Net Income

$696.14M

7.3% Net Margin

EPS (Diluted)

$4.07

Total Assets

$4.93B

Cash & Equivalents

$1.53B

Free Cash Flow

$654.97M

Financial Statements
Beta
Revenue$9.58B
Operating Expenses$8.64B
Operating Income$940.44M
Interest Expense$219K
Net Income$696.14M
EPS (Basic)$4.14
EPS (Diluted)$4.07
Shares Outstanding (Basic)168.33M
Shares Outstanding (Diluted)170.90M

Key Highlights

  • 1Expeditors reported a significant 63% increase in airfreight revenues in 2020, primarily driven by a 78% rise in average sell rates due to pandemic-induced capacity shortages and high demand for essential goods and technology.
  • 2Despite volume decreases in some segments (e.g., ocean freight, customs brokerage), overall revenues increased by 23.7% to $10.12 billion in 2020, with operating income growing to $940.4 million.
  • 3The company maintained a robust financial position with $1.53 billion in cash and cash equivalents and no long-term debt at the end of 2020.
  • 4Expeditors' non-asset-based business model provided flexibility but also led to a 72% increase in airfreight expenses due to significantly higher buy rates.
  • 5The company successfully managed supply chain disruptions by increasing its use of charter flights and navigating volatile market conditions.
  • 6Customs brokerage and other services experienced a slight revenue decrease of 2% in 2020, impacted by slowdowns in sectors like aerospace, automotive, and retail.
  • 7Expeditors continues to focus on its global network, proprietary technology, and a strong employee culture with an incentive-based compensation system, which were key to navigating the challenging 2020 environment.

Frequently Asked Questions

The COVID-19 pandemic significantly impacted Expeditors' business. While it caused disruptions and slowdowns in some sectors and led to decreased tonnage in certain service lines like ocean freight and customs brokerage, it also created unprecedented demand and extreme price volatility in airfreight. This was due to reduced passenger flight capacity, leading to limited cargo space and significantly higher rates, which boosted airfreight revenues despite lower volumes in some cases.

Expeditors demonstrated strong financial health in 2020, with revenues growing to over $10.1 billion and operating income increasing. The company maintained a healthy balance sheet with $1.53 billion in cash and no long-term debt, indicating significant liquidity. The outlook suggests continued volatility in freight markets and potential ongoing impacts from the pandemic, but the company's flexible, non-asset-based model and strategic focus are expected to help it navigate these challenges.

Expeditors' non-asset-based model allows for significant flexibility in managing logistics operations and adapting to changing market conditions without the burden of owning and maintaining physical assets like aircraft or ships. This enables them to purchase capacity from carriers and resell it. However, this also means they are exposed to the volatility of carrier pricing. In 2020, this model allowed them to charter flights and adapt to capacity shortages, but it also led to substantially higher costs (buy rates) as they had to secure space in a tight market.

Key risks include disruptions to global trade due to economic conditions, geopolitical events, or health emergencies like pandemics. The company is also exposed to the financial stability and capacity of its service providers (airlines, ocean carriers), intense industry competition, currency exchange rate fluctuations, and regulatory changes. The dependency on skilled personnel and potential disruptions to its technology network are also significant operational risks.