10-QPeriod: Q1 FY2019

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 8, 2019For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported solid financial results for the first quarter ended March 31, 2019. Total revenues increased by 8.96% year-over-year, reaching $2.02 billion, driven significantly by growth in Customs brokerage and other services, which saw a 22% revenue increase. Net earnings attributable to shareholders also rose by 3.01% to $139.7 million. The company demonstrated strong operational cash flow, with net cash from operating activities increasing by 22.9% to $289.5 million. A key development during the quarter was the adoption of new lease accounting guidance (ASC 842), which resulted in the recognition of operating lease right-of-use assets and liabilities on the balance sheet, reflecting the company's significant commitment to leased office and warehouse spaces. Despite some headwinds in airfreight services, the overall performance highlights the resilience and growth potential of Expeditors' diversified logistics offerings.

Financial Highlights

41 data points
Beta

Revenue

$2.02B

Net Income

$139.70M

6.9% Net Margin

EPS (Diluted)

$0.80

Total Assets

$3.64B

Cash & Equivalents

$1.19B

Free Cash Flow

$289.48M

Financial Statements
Beta
Revenue$2.02B
Operating Expenses$1.83B
Operating Income$187.60M
Net Income$139.70M
EPS (Basic)$0.81
EPS (Diluted)$0.80
Shares Outstanding (Basic)171.82M
Shares Outstanding (Diluted)175.39M

Key Highlights

  • 1Total revenues increased to $2.02 billion, up 8.96% compared to Q1 2018, primarily driven by strong performance in customs brokerage and other services.
  • 2Net earnings attributable to shareholders grew by 3.01% to $139.7 million ($0.80 per diluted share), indicating improved profitability.
  • 3Net cash from operating activities significantly increased by 22.9% to $289.5 million, showcasing robust cash generation.
  • 4Customs brokerage and other services revenue surged by 22% year-over-year, demonstrating robust demand and the company's strong market position in this segment.
  • 5The company adopted new lease accounting standards (ASC 842) as of January 1, 2019, resulting in the recognition of operating lease right-of-use assets ($349 million) and liabilities ($348 million) on the balance sheet.
  • 6Airfreight services experienced a slight revenue decline of 2% and a more significant net revenue decrease of 6%, attributed to lower tonnage and higher buy rates.
  • 7The company continued its share repurchase program, repurchasing $44.3 million of common stock during the quarter, reflecting a commitment to returning value to shareholders.

Frequently Asked Questions

The primary driver of revenue growth was the Customs brokerage and other services segment, which saw a substantial 22% increase in revenues. This was further supported by a 9% increase in Ocean freight and ocean services revenue, offsetting a slight decrease in Airfreight services revenue.

Effective January 1, 2019, Expeditors adopted new lease accounting guidance (ASC 842). This resulted in the recognition of operating lease right-of-use assets of $349 million and corresponding lease liabilities of $348 million on the balance sheet. This change reflects the company's commitment to leased office and warehouse spaces.

While Airfreight services face some challenges due to market imbalances leading to higher buy rates, the company expects continued growth in Ocean freight and Customs brokerage. Pricing volatility is anticipated to persist in ocean freight due to carrier consolidations and regulatory changes. Customers are increasingly relying on specialized customs brokers like Expeditors for their expertise and technological capabilities.

Expeditors demonstrated strong operational cash flow, with net cash from operating activities increasing significantly. The company had $1.19 billion in cash and cash equivalents at the end of the quarter and no long-term debt other than recorded lease liabilities. Management believes its current cash position and operating cash flows are sufficient to meet liquidity and capital requirements for at least the next 12 months.