10-QPeriod: Q1 FY2023

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q1 Ended Mar 31, 2023

Filed May 4, 2023For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported a significant decrease in revenues and net earnings for the first quarter of 2023 compared to the same period in the prior year. This decline is primarily attributed to softening global economic conditions, reduced customer demand, and normalizing supply chain dynamics, leading to lower freight volumes and declining average buy and sell rates across airfreight and ocean freight services. While revenue from customs brokerage and other services saw a smaller decline, overall top-line performance was substantially impacted by these macroeconomic factors. Despite the revenue challenges, the company demonstrated operational resilience by increasing net cash from operating activities by 32% year-over-year, primarily driven by improved accounts receivable collections. Expeditors also returned significant capital to shareholders through common stock repurchases totaling $214 million in the quarter. The company ended the period with a strong cash position and no long-term debt, indicating financial stability. Management remains focused on aligning expenses with transactional volumes and investing in technology and strategic growth initiatives.

Financial Highlights

42 data points
Beta

Revenue

$2.59B

Net Income

$226.00M

8.7% Net Margin

EPS (Diluted)

$1.45

Total Assets

$5.33B

Cash & Equivalents

$2.35B

Free Cash Flow

$546.41M

Financial Statements
Beta
Revenue$2.59B
Operating Expenses$2.32B
Operating Income$275.97M
Interest Expense$2.65M
Net Income$226.00M
EPS (Basic)$1.47
EPS (Diluted)$1.45
Shares Outstanding (Basic)154.16M
Shares Outstanding (Diluted)155.47M

Key Highlights

  • 1Revenues decreased significantly by 44.4% to $2.59 billion year-over-year, driven by substantial declines in airfreight (-43%) and ocean freight (-65%) services, reflecting lower volumes and rates.
  • 2Net earnings attributable to shareholders fell by 35% to $226 million, with diluted earnings per share decreasing to $1.45 from $2.05.
  • 3Operating income saw a substantial decrease of 40% to $276 million, impacted by lower revenues across all service lines.
  • 4Cash from operating activities increased by 32% to $546 million, a positive sign of improving cash generation and efficient working capital management, notably through better accounts receivable collection.
  • 5The company returned $214 million to shareholders through common stock repurchases in the quarter, demonstrating a commitment to returning value.
  • 6Total assets decreased to $5.33 billion from $5.59 billion, primarily due to a reduction in current assets like accounts receivable and deferred contract costs, balanced by increased cash.
  • 7The company ended the quarter with no long-term debt, maintaining a strong balance sheet with $2.35 billion in cash and cash equivalents.

Frequently Asked Questions

The primary driver is the softening global economy and reduced customer demand, leading to lower freight volumes and declining average buy and sell rates. This trend is particularly pronounced in airfreight and ocean freight services, where capacity now exceeds demand after supply chain congestion has cleared.

Expeditors is focusing on aligning headcount and overhead expenses with transactional volumes. Salaries and related costs decreased by 17% year-over-year, largely due to lower commissions and bonuses tied to reduced operating income. The company also notes that expenses related to the 2022 cyber-attack were insignificant in Q1 2023.

The company maintains a strong financial position with $2.35 billion in cash and cash equivalents and no long-term debt at the end of the quarter. Net cash from operating activities increased by 32% to $546 million, indicating robust cash generation. Management believes current cash and operating cash flows are sufficient to meet liquidity and capital requirements for at least the next 12 months.

The direct financial impact of the cyber-attack in the first quarter of 2023 was insignificant. While the company incurred significant costs related to the attack in Q1 2022 (approximately $42 million in incremental demurrage charges and $20 million in investigation/recovery costs), these were not material in the current period. However, the cyber-attack did result in lost revenues in Q1 2022 and impacted order management services in that period.