10-QPeriod: Q3 FY2022

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q3 Ended Sep 30, 2022

Filed November 8, 2022For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported solid financial results for the nine months ended September 30, 2022, demonstrating resilience despite a challenging operating environment. Net earnings attributable to shareholders increased by 18% year-over-year to $1.138 billion. This growth was driven by strong performance in Ocean freight and customs brokerage services, with revenues up significantly due to increased rates, partially offset by lower volumes. Airfreight services saw a revenue increase of 5% year-over-year, though volumes declined. The company successfully navigated the residual impacts of a significant cyber-attack in February 2022, which caused a three-week operational disruption. Despite this, operating income grew 16% year-over-year to $1.495 billion, reflecting effective cost management and strategic pricing. The company also returned significant value to shareholders, repurchasing $1.018 billion of its common stock and paying dividends, underscoring a commitment to shareholder returns. Management expresses confidence in the company's liquidity and ability to meet future obligations.

Financial Highlights

43 data points
Beta

Revenue

$4.36B

Net Income

$414.21M

9.5% Net Margin

EPS (Diluted)

$2.54

Total Assets

$6.61B

Cash & Equivalents

$2.15B

Free Cash Flow

$670.38M

Financial Statements
Beta
Revenue$4.36B
Operating Expenses$3.84B
Operating Income$526.92M
Interest Expense$470K
Net Income$414.21M
EPS (Basic)$2.56
EPS (Diluted)$2.54
Shares Outstanding (Basic)162.03M
Shares Outstanding (Diluted)163.25M

Key Highlights

  • 1Net earnings attributable to shareholders increased 18% to $1.138 billion for the nine months ended September 30, 2022.
  • 2Total revenues grew 23% year-over-year to $13.63 billion for the nine months ended September 30, 2022.
  • 3Ocean freight and ocean services revenue saw substantial growth of 48% year-over-year for the nine months, driven by higher rates.
  • 4The company returned $1.018 billion to shareholders through common stock repurchases and $109.8 million in dividends for the nine months ended September 30, 2022.
  • 5Despite a significant cyber-attack in February 2022 causing operational disruptions, operating income increased by 16% to $1.495 billion for the nine months.
  • 6Cash flow from operations was robust, totaling $1.643 billion for the nine months ended September 30, 2022.
  • 7The company's effective income tax rate decreased to 24.4% for the nine months ended September 30, 2022, benefiting from U.S. income tax deductions for FDII.

Frequently Asked Questions

The cyber-attack in February 2022 led to a three-week shutdown of operations. While the company incurred approximately $55 million in incremental demurrage charges and $15 million in investigation and remediation expenses, management believes the residual effects are being navigated. The company reported a 16% increase in operating income for the nine months, suggesting resilience, although specific revenue losses from the downtime were not quantifiable.

The company noted a softening of customer demand due to a slowdown in the global economy and customer inventory build-ups. Average buy and sell rates have been declining since the second quarter of 2022. While ocean freight and customs brokerage revenues saw significant year-over-year growth due to high rates, future growth may be impacted by declining volumes and rates if economic conditions persist or worsen.

Expeditors experienced a 10% increase in total overhead expenses for the nine months, partly due to cyber-attack related costs and increased headcount. However, the company strategically manages directly related transportation costs, which generally moved in line with revenues for airfreight services and less so for ocean and customs brokerage, where rate increases outpaced volume changes. Management's compensation structure is also designed to align incentives with profitability.

Expeditors demonstrated a strong commitment to returning capital through significant stock repurchases, amounting to $1.018 billion for the first nine months of 2022. The company also declared and paid semi-annual dividends, with the latest declared dividend of $0.67 per share. The Discretionary Stock Repurchase Plan has authorization to reduce outstanding shares down to 150 million.