10-QPeriod: Q1 FY2021

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q1 Ended Mar 31, 2021

Filed May 6, 2021For Securities:EXPD

Summary

Expeditors International of Washington Inc. (EXPD) reported a substantial increase in financial performance for the first quarter of 2021 compared to the same period in 2020. The company experienced a significant surge in revenues across all its service segments, driven by strong global shipping demand and capacity constraints. Net earnings attributable to shareholders more than doubled, reflecting the company's ability to navigate a challenging global logistics environment characterized by supply chain disruptions and high freight rates. The balance sheet shows a healthy increase in total assets, largely due to growth in current assets like cash and receivables, indicative of increased business activity. Shareholders' equity also saw a significant rise, driven by retained earnings. While the company faced increased operating expenses, largely due to higher freight costs mirroring higher revenues, its operational efficiency and pricing power allowed for substantial profit growth. Investors should note the continued impact of the COVID-19 pandemic on supply chains, which, while contributing to strong results in the short term, also presents ongoing volatility.

Financial Highlights

41 data points
Beta

Revenue

$3.20B

Net Income

$287.22M

9.0% Net Margin

EPS (Diluted)

$1.67

Total Assets

$5.45B

Cash & Equivalents

$1.79B

Free Cash Flow

$355.83M

Financial Statements
Beta
Revenue$3.20B
Operating Expenses$2.81B
Operating Income$385.51M
Net Income$287.22M
EPS (Basic)$1.70
EPS (Diluted)$1.67
Shares Outstanding (Basic)169.21M
Shares Outstanding (Diluted)171.55M

Key Highlights

  • 1Total revenues surged by 76% year-over-year to $3.36 billion for the three months ended March 31, 2021.
  • 2Net earnings attributable to shareholders dramatically increased by 135% to $287.2 million.
  • 3Diluted earnings per share grew from $0.71 in Q1 2020 to $1.67 in Q1 2021, a 135% increase.
  • 4Airfreight and Ocean freight services revenues more than doubled, driven by a substantial increase in average sell and buy rates and higher volumes.
  • 5Operating income showed a remarkable increase of 142% to $385.5 million.
  • 6Cash from operating activities more than doubled to $355.7 million, indicating strong cash generation.
  • 7The company's balance sheet strengthened with total assets growing to $5.45 billion and shareholders' equity increasing to $2.88 billion.

Frequently Asked Questions

The substantial growth was primarily driven by unprecedented imbalances between high global shipping demand and limited carrier capacity, exacerbated by ongoing supply chain disruptions related to the COVID-19 pandemic. This led to historically high average sell and buy rates, particularly in airfreight and ocean freight services, which more than offset increased operating expenses.

While operating expenses increased significantly, they did so at a slightly lower percentage than revenues. Expeditors leveraged its purchasing power and capacity agreements with carriers to negotiate rates. The company also utilized charter flights and purchased capacity in the spot market to meet customer demand, passing on a significant portion of these higher costs to customers through increased sell rates.

The company expects these disruptive conditions, characterized by high rates and capacity constraints, to continue for the remainder of the year. However, Expeditors acknowledges that these unprecedented operating conditions are not expected to be sustained long-term. The company is unable to predict the exact impact of future uncertainties and disruptions on its operations and financial results, and there's a possibility of continued pricing volatility.

Expeditors has a Discretionary Stock Repurchase Plan aimed at reducing outstanding shares. In the first quarter of 2021, the company repurchased approximately 0.9 million shares. This program is used to manage the growth in outstanding shares, often funded by proceeds from stock option exercises and available cash, indicating a commitment to returning value to shareholders and managing share count.