Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced second quarter 2022 financial results including the following highlights compared to the same quarter of 2021:

• Diluted Net Earnings Attributable to Shareholders per share (EPS¹) increased 23% to $2.27
• Net Earnings Attributable to Shareholders increased 19% to $378 million
• Operating Income increased 23% to $506 million
• Revenues increased 28% to $4.6 billion
• Airfreight tonnage volume and ocean container volume decreased 17% and 11%, respectively

“This was the strongest second quarter in our company’s history, even while our air and ocean volumes were soft compared to a year ago,” said Jeffrey S. Musser, President and Chief Executive Officer. “During the second quarter we continued the recovery from the February cyber-attack and re-established digital connections with many of our customers, which limited our ability to move cargo through our systems. We also experienced a significant drop in volumes in China due to the various lockdowns that resulted in factories not operating and cargo being unavailable to ship. We believe the volume changes are primarily related to timing of our recovery from the cyber-attack, our significant market presence in China, as well as a slowing economy and an overall drop in demand. We simply cannot say enough about the quality of our employees and their commitment to our customers over the last couple of years. Our experiences during the pandemic and recovery from the cyber-attack have tested the will of our staff, as well as the strength and commitment of our service providers and customers.

“Looking at the current environment, our perspective is that there is a great deal of uncertainty in the marketplace. Buy and sell rates have come down from their peaks but remain elevated and out of balance by historical standards. We see signs that the global economy has started to slow and that capacity is no longer severely constrained relative to demand that has also come down from earlier peaks. Nevertheless, airline belly capacity in many markets has not bounced back and we continued to access additional capacity by using air charters to meet shipper demand. Ocean transit times continued to be stretched by port congestion and many ongoing shortages of equipment, labor, and warehousing space. Various onshore bottlenecks further impacted many of our ocean and air lanes, in addition to affecting our customs business due to record high drayage, storage, delivery, demurrage, and detention costs at destination. We do not see signs that these conditions are likely to improve significantly any time soon. The unpredictability of COVID restrictions and lockdowns in China, as well as route restrictions and sanctions from the Ukraine conflict, continue to make global shipping a highly challenging business right now. But the strength of our organization and culture is in bringing order to chaos to service the needs of our customers by accessing capacity and delivering solutions despite the many disruptions.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “All of our products performed well during the quarter and we returned $659 million to shareholders in repurchased stock and dividends. Given the current economic uncertainty and government actions aimed at taming inflation, along with the ongoing challenges throughout the global supply chain, we believe that rates will continue to be highly volatile at least through the end of the year, while generally continuing to trend downwards from their highs over the longer-term. We are no strangers to uncertainty and remain highly disciplined and focused on our customers’ need for capacity and solutions. We will continue to explore ways to further enhance our already strong efficiencies as we continue to adapt to the current operating environment.”

Expeditors is a global logistics company headquartered in Seattle, Washington. The Company employs trained professionals in 176 district offices and numerous branch locations located on six continents linked into a seamless worldwide network through an integrated information management system. Services include the consolidation or forwarding of air and ocean freight, customs brokerage, vendor consolidation, cargo insurance, time-definite transportation, order management, warehousing and distribution and customized logistics solutions.

Disclaimer on Forward-Looking Statements:

Certain statements contained in this news release are “forward-looking statements,” based on management’s views with respect to future events and underlying assumptions that involve risks and uncertainties. These forward-looking statements include statements regarding the financial and operational impact of the cyber-attack; the future stabilization of supply/demand imbalance and rate volatility; the continued unsettled operating environment due to uncertain air and ocean capacity; volatile air and ocean pricing and uneven demand for such services; port congestion; equipment imbalances; labor shortages; insufficient warehouse and pier space; trade disruptions; rising fuels costs; the conflict in Ukraine; signs of a slowing economy and drop in demand; and the uneven lifting of the COVID-19 pandemic restrictions around the world. Future financial performance could differ materially because of factors such as: our ability to leverage the strength of our carrier relationships to secure space; the strength of our non-asset-based operating model; our expectation that the supply/demand imbalance, rate volatility, and various on-shore bottlenecks are unlikely to improve any time soon; our ability to fully re-open our offices for return-to-work; our ability to continue to enhance our productivity; our ability to invest in our strategic efforts to explore new areas for profitable growth; our ability to avoid another material cyber-attack; and our ability to remain a strong, healthy, unified and resilient organization. The ongoing impact of the COVID-19 pandemic could have the effect of heightening many of the other risks described in Item 1A of our Annual Report on Form 10-K, including, without limitation, those related to the success of our strategy and desire to maintain historical unitary profitability, our ability to attract and retain customers, our ability to manage costs, interruptions to our information technology systems, the ability of third-party providers to perform and potential litigation as updated by our reports on Form 10-Q, filed with the Securities and Exchange Commission. These and other factors are discussed in the Company’s regulatory filings with the Securities and Exchange Commission, including those in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and the Company’s most recent Form 10-Q. The forward-looking statements contained in this news release speak only as of this date and the Company does not assume any obligation to update them except as required by law.

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¹ Directly related cost of transportation and other expenses totals Operating Expenses from Airfreight services, Ocean freight and ocean services and Customs brokerage and other services as shown in the Condensed Consolidated Statements of Earnings.

² Salaries and other operating expenses totals Salaries and related, Rent and occupancy, Depreciation and amortization, Selling and promotion and Other as shown in the Condensed Consolidated Statements of Earnings.

Financial Impact of the Cyber-Attack

In the three and six months ended June 30, 2022, the Company incurred, as a result of our inability to timely process and move shipments through ports, approximately $22 million and $62 million, respectively, in incremental demurrage charges, where the Company has direct liability for this obligation. These costs are recorded in customs brokerage and other services expenses.

Additionally, principally in the first quarter, the Company incurred investigation, recovery, and remediation expenses, including costs to recover its operational and accounting systems and to enhance cybersecurity protections. These costs are primarily comprised of various consulting services including cybersecurity experts, outside legal advisors, and other IT professional expenses. The Company also recorded estimated liabilities for potential shipment-related claims. Total amounts recorded for the items above for the three and six months ended June 30, 2022 were approximately $6 million and $28 million, respectively, and are reported in other operating expenses. The Company does not expect to incur significant capital expenditures as a result of the cyber-attack.

The Company may incur additional expenses which could include third-party expenses, incremental information services costs, legal fees, or indemnities to customers or business partners. When the Company’s operating systems were down, many customers worked with other providers to meet their logistics needs, resulting in lower shipment volumes in the first quarter and to a lesser extent in the second quarter for which the financial impact on revenues and operating income cannot be quantified. Such costs and the ongoing impacts from the down time caused by the cyber-attack could have a further material adverse impact on the Company’s business, revenues, expenses, results of operations, cash flows and reputation. The Company is unable to estimate the ultimate direct and indirect financial impacts of this cyber-attack.

During the three and six months ended June 30, 2022, we repurchased 5 million shares of common stock at $109.81 per share. During the three and six months ended June 30, 2021, we repurchased 0.5 million and 1.4 million shares of common stock at an average price of $124.94 and $104.20 per share, respectively.

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on August 5, 2022 will be considered in management's 8-K “Responses to Selected Questions.”

¹Directly related cost of transportation and other expenses totals operating expenses from Airfreight services, Ocean freight and ocean services and Customs brokerage and other services as shown in the Condensed Consolidated Statements of Earnings.

²Salaries and other operating expenses totals salaries and related, rent and occupancy, depreciation and amortization, selling and promotion and other as shown in the Condensed Consolidated Statements of Earnings.

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