10-QPeriod: Q3 FY2020

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 4, 2020For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported solid financial results for the nine months ended September 30, 2020, demonstrating resilience amidst the COVID-19 pandemic. Total revenues grew by 13% year-over-year to $6.95 billion, driven significantly by a substantial increase in airfreight services revenue, which surged by 49% to $3.24 billion. This surge was primarily due to a 70% increase in average sell rates, reflecting high global demand for time-sensitive shipments of medical supplies and technology, coupled with constrained airfreight capacity. Net earnings attributable to shareholders rose by 10% to $497.5 million, with diluted earnings per share increasing to $2.92 from $2.60 in the prior year period. The company maintained strong operational income growth of 12% year-over-year, reaching $658.6 million. Despite increased operating expenses, particularly in airfreight services due to elevated buy rates, Expeditors effectively managed its costs. The company's liquidity remains robust, with cash and cash equivalents at $1.47 billion as of September 30, 2020, and no long-term debt other than lease liabilities. Management expressed confidence in its ability to meet financial obligations and expects current cash positions and operating cash flows to be sufficient for at least the next 12 months.

Financial Highlights

43 data points
Beta

Revenue

$2.35B

Net Income

$191.31M

8.1% Net Margin

EPS (Diluted)

$1.12

Total Assets

$4.36B

Cash & Equivalents

$1.47B

Free Cash Flow

$161.57M

Financial Statements
Beta
Revenue$2.35B
Operating Expenses$2.10B
Operating Income$251.94M
Net Income$191.31M
EPS (Basic)$1.14
EPS (Diluted)$1.12
Shares Outstanding (Basic)168.31M
Shares Outstanding (Diluted)170.74M

Key Highlights

  • 1Total revenues increased by 13% to $6.95 billion for the nine months ended September 30, 2020, compared to $6.13 billion in the prior year.
  • 2Net earnings attributable to shareholders grew by 10% to $497.5 million, or $2.92 per diluted share, compared to $453.1 million, or $2.60 per diluted share, in the same period last year.
  • 3Airfreight services revenue saw a significant increase of 49% to $3.24 billion, driven by a 70% rise in average sell rates due to high demand and limited capacity.
  • 4Operating income increased by 12% to $658.6 million, indicating effective cost management despite increased operational challenges.
  • 5The company maintained a strong liquidity position with $1.47 billion in cash and cash equivalents and no significant long-term debt.
  • 6Despite global economic disruptions from COVID-19, Expeditors generated robust operating cash flow, demonstrating business continuity and operational resilience.

Frequently Asked Questions

The COVID-19 pandemic significantly impacted Expeditors' operations, leading to disruptions in global trade and supply chains. However, the company demonstrated resilience, with total revenues increasing by 13% year-over-year. Airfreight services revenue saw a substantial surge due to high demand for time-sensitive shipments and constrained capacity, while other services experienced varied impacts. The company successfully managed increased operating expenses and maintained strong cash flow.

The nearly 50% increase in airfreight services revenue is primarily driven by a 70% rise in average sell rates. This surge is attributed to the global pandemic, which led to a significant reduction in airline capacity (belly space) at a time when demand for transporting essential medical supplies, technology equipment, and PPE remained high, especially for time-sensitive deliveries from North Asia.

Expeditors maintains a strong liquidity position, with cash and cash equivalents totaling $1.47 billion as of September 30, 2020. The company has no long-term debt obligations other than recorded lease liabilities, indicating a healthy balance sheet and the ability to meet its financial commitments.

While Expeditors experienced increased operating expenses, particularly in airfreight services due to higher buy rates reflecting market demand and capacity constraints, the company managed its overall expenses effectively. Total operating expenses increased at a lower rate than revenues, contributing to a 12% increase in operating income. The company's compensation structure, which links bonuses to profitability, also incentivizes cost control.