EXPEDITORS INTERNATIONAL OF WASHINGTON INC

Expeditors International of Washington, Inc. operates in the global logistics services industry as a non-asset-based third-party logistics provider, purchasing cargo space from carriers such as airlines, ocean shipping lines, and trucking lines on a volume basis and reselling that space to customers. The industry is intensely competitive, with a large number of companies competing in one or more segments, though the number of firms with a global network offering a full complement of logistics services is more limited. The primary competitive factors are price and quality of service, including reliability, responsiveness, expertise, convenience, and scope of operations. The industry continues to experience consolidations into larger firms striving for stronger multinational and multi-service networks, while regional and local competitors maintain a strong presence in certain markets. Supply chain disruptions stemming from geopolitical tensions, port labor disruptions, tariffs, and trade policy changes have accelerated trends towards reshoring and nearshoring, prompting many companies to reconsider their sourcing strategies.

Expeditors competes against both niche players and larger entities, with some competitors having significantly more resources than the Company. The Company emphasizes quality customer service underscored by a strong commitment to compliance and believes its prices are market competitive. Unlike many competitors who have grown by merger and acquisition, Expeditors operates fully integrated transportation, customs brokerage, and accounting systems running on a common hardware platform in all districts, and has pursued a strategy emphasizing organic growth supplemented by select strategic acquisitions. Management believes that the ability to develop and deliver innovative solutions to meet customers' increasingly sophisticated supply chain requirements is a critical factor in ongoing success. The Company's unique culture, centered on its employees, and its incentive-based compensation program are considered critical components to continued success and differentiators from competitors.

Expeditors generates revenue by providing a full suite of global logistics services, including air and ocean freight consolidation and forwarding, customs brokerage, warehousing and distribution, purchase order management, vendor consolidation, time-definite transportation, temperature-controlled transit, cargo insurance, specialized cargo monitoring and tracking, and other customized logistics and consulting solutions. The Company derives revenues by entering into agreements that are generally comprised of a single performance obligation, which is that freight is shipped for and received by the customer. The major portion of air and ocean freight revenues is generated by purchasing transportation services on a volume basis from direct carriers and reselling that space to customers, with the sell rate recognized as revenues and the buy rate recognized in operating expenses. The Company's three principal services are airfreight services, ocean freight and ocean services, and customs brokerage and other services. No single customer accounts for five percent or more of revenues. The Company serves a diversified group of customers that vary in size, industry, and geographic location, including industries such as technology, cloud and data center services, hyperscalers, semiconductor, healthcare, automotive, aviation, aerospace, retail, and high fashion.

Airfreight services accounted for approximately 36% and 34% of total revenues in 2025 and 2024, respectively. Within airfreight, Expeditors typically acts either as a freight consolidator, purchasing cargo capacity from airlines on a volume basis and reselling that space to customers, or as an agent for the airline. The average airfreight consolidation weighs approximately 3,700 pounds. Airfreight services revenues were $3,982,882 thousand ¹ in 2025 and $3,669,673 thousand ² in 2024, with directly related expenses of $2,979,993 thousand ³ and $2,731,552 thousand ⁴, respectively. Ocean freight and ocean services accounted for approximately 25% and 30% of total revenues in 2025 and 2024, respectively. Ocean freight services are comprised of ocean freight consolidation, direct ocean forwarding, and order management. Ocean freight and ocean services revenues were $2,814,960 thousand ⁵ in 2025 and $3,148,514 thousand ⁶ in 2024, with expenses of $2,029,847 thousand ⁷ and $2,356,952 thousand ⁸, respectively. Customs brokerage and other services accounted for approximately 39% and 36% of total revenues in 2025 and 2024, respectively. Customs brokerage and other services revenues were $4,271,167 thousand ⁹ in 2025 and $3,782,328 thousand ¹⁰ in 2024, with expenses of $2,392,241 thousand ¹¹ and $2,098,214 thousand ¹², respectively.

Customs brokerage and other services include customs brokerage and import services, Transcon intra-continental ground transportation, warehousing and distribution services, and consulting services through Tradewin. Customs brokerage helps customers clear shipments through customs by preparing and filing required documentation, calculating and providing for payment of duties and other taxes, and arranging for required inspections. Transcon consists of intra-continental ground transportation including time-definite less-than-truck and full-truck solutions. Warehousing and distribution services include inventory management, multi-channel order fulfillment, vendor managed inventory programs, and other value-added services, generally offered in multi-client facilities. The Company also operates a Project Cargo unit that handles special project shipments requiring a high level of specialized attention due to unusual size or nature. The Company's technology platform is comprised of proprietary, third party, and open-source technologies, and is designed, coded, tested, and implemented by the collaborative efforts of logistics industry and information technology professionals.

During 2025, the Company repurchased 5.6 million shares of common stock at an average price of $118.01 per share ¹³ and paid cash dividends of $1.54 per share ¹⁴. In 2024, the Company repurchased 7.1 million shares of common stock at an average price of $119.47 per share ¹⁵ and paid cash dividends of $1.46 per share ¹⁶. On February 23, 2026, the Board of Directors authorized a new share repurchase program that permits the repurchase of up to $3 billion ¹⁷ of the Company's common stock, effective upon the expiration of the current program. The Company returned $875 million ¹⁸ to shareholders through common stock repurchases and dividends in 2025. Capital expenditures were $53 million ¹⁹ in 2025 compared to $40 million ²⁰ in 2024. The Company hired additional qualified personnel to support the remediation process and the design and implementation of IT controls, and implemented additional third-party industry-standard software solutions to strengthen IT change management and logical access processes.

Total revenues increased 4% to $11,069,009 thousand ²¹ in 2025 from $10,600,515 thousand ²² in 2024. Operating income increased 1% to $1,052,546 thousand ²³ from $1,041,323 thousand ²⁴ in 2024. Net earnings attributable to shareholders remained essentially flat at $810,332 thousand ²⁵ in 2025 compared to $810,073 thousand ²⁶ in 2024. Diluted earnings per share increased 4% to $5.95 ²⁷ from $5.72 ²⁸ in 2024. Cash from operations was $1.0 billion ²⁹, up from $723 million ³⁰ in 2024. The effective income tax rate was 25.8% ³¹ in 2025 and 25.9% ³² in 2024. Customs brokerage and other services and airfreight services revenues increased 13% and 9%, respectively, while ocean freight and ocean services revenues decreased 11%.

The Company's key strategic initiatives include ensuring that base-line strategies for air, ocean, and customs services for every district office and region lead to growth at sustainable and competitive market rates, profits, and volumes by services. A second growth vector is growing business services into and out of Europe, with particular focus on certain defined markets beyond base-line growth expectations. A third strategic initiative is growing the customs brokerage offering throughout Asia by leveraging strength and expertise in customs brokerage services and developing critical talent, processes, and tools. The Company is investing in its technology strategy, including intentional and critical consideration of how best to implement a range of technology solutions, including artificial intelligence (AI). The Company is in the early days in the deployment of AI and continues to work to see where it can be applied most beneficially, with groups creating their own agents and using tools in various areas of the business to gain efficiency and improve effectiveness.

The Company expects to continue to enhance security and internal controls over its technology and systems and plans to deploy additional solutions which will result in increased expenses in the future. The Company will also continue to make important investments in people, processes, and technology, as well as to invest in strategic efforts to drive organic growth. Salaries and related costs increased 9% in 2025, principally due to an 8% increase in headcount and increases in base salaries and benefits along with increases in incentive compensation commensurate with higher revenues and operating income. Other overhead expenses increased 15% in 2025, primarily due to higher rental and occupancy expenses, technology related expenses, consulting, travel, and indirect taxes. The Company expects pricing volatility to continue as carriers adapt to changes in demand, changing fuel prices, available capacity, security risks, and react to governmental trade policies and other regulations.

Total anticipated capital expenditures in 2026 are currently estimated to be approximately $100 million ³³, including investments in technology infrastructure, leasehold and building improvements, and routine capital expenditures. The Company expects to continue to enhance security and internal controls over its technology and systems and plans to deploy additional solutions. The Company is continually improving and enhancing its systems and processes, including meaningful upgrades to core operating and accounting systems. The Company hired employees in operations to support the added complexity and higher demand for customs brokerage services, primarily in North America, and support the growth in volumes transacted in certain services and regions such as South Asia and Europe. The Company also continued to hire IT personnel to support essential investments which further strengthens critical information systems.

Capital expenditures were $53 million ³⁴ in 2025 compared to $40 million ³⁵ in 2024. Total anticipated capital expenditures in 2026 are currently estimated to be approximately $100 million ³⁶. The Company has a Discretionary Stock Repurchase Plan under which management is allowed to repurchase shares to reduce the issued and outstanding stock to 130 million shares of common stock. On February 23, 2026, the Board of Directors authorized a new share repurchase program that permits the repurchase of up to $3 billion ³⁷ of the Company's common stock, effective upon the expiration of the current program. The Board of Directors declared semi-annual dividends of $0.77 ³⁸ per share in June 2025 and December 2025, and $0.73 ³⁹ per share in June 2024 and December 2024.

The current volatile international trade environment as a result of intergovernmental disputes, trade actions, increased tariffs, and other geo-political risks may adversely impact the Company's business and operating results. The United States has undertaken a substantial global tariff rebalancing effort resulting in higher tariffs on imports, including significantly higher tariffs on goods made in China and sectoral tariffs on a range of materials and products, leading to threatened or actual retaliatory tariffs from several countries. The Company generated 19% ⁴⁰ and 22% ⁴¹ of its revenues and 15% ⁴² and 17% ⁴³ of its operating income in 2025 and 2024, respectively, on exports from China and Hong Kong. The potential for further tariff changes and trade restrictions remains high, creating an unpredictable environment for international trade. The constant changes in trade regulations since the beginning of 2025 are adding complexity to the customs declarations process, making compliance with regulations increasingly challenging.

The global economic and trade environments remain highly uncertain, including inflation remaining higher than historical levels, volatility in oil prices, high interest rates, and the conflicts in the Middle East and Ukraine. Softening demand and additional available capacity for ocean freight resulted in declines in ocean sell and buy rates starting in the second quarter of 2025. Additional ocean and air transportation capacity will become available as demand softens due to uncertainty in economic and trade regulations and safe passage through the Red Sea resumes, which could result in declines in average sell and buy rates. Some customers are relocating manufacturing to other countries to mitigate the impact of higher tariffs on imports, reduce their supply chain risks, and address disruptions caused by pandemics and geopolitical issues, which could negatively affect the Company's business. The Company cannot predict how changes in tariffs and trade restrictions will affect its business.

The Company's business is particularly exposed to trade volume impacts from trade actions and tariff disputes between China and the United States, as it generated 19% ⁴⁴ and 22% ⁴⁵ of its revenues and 15% ⁴⁶ and 17% ⁴⁷ of its operating income in 2025 and 2024, respectively, on exports from China and Hong Kong. The global logistics services industry is intensely competitive, and many competitors have significantly more resources than Expeditors, which could result in loss of business, reduced revenues, or reduced margins. The Company is dependent on service providers including air, ocean, and ground freight carriers; when market demand significantly exceeds available capacity, the Company may not always be able to find acceptable transportation solutions to meet customers' needs. The Company relies heavily on the flexibility and sophistication of its technologies, and any significant disruptions or unapproved third-party access to its global systems could materially harm business and financial results, as occurred during a cyber-attack in February 2022 that led to lost revenue, shipment-processing delays, and significant remediation costs. The Company is subject to a complex regulatory environment, and failure to comply with regulations related to handling dangerous materials, trade compliance, data privacy, and anti-corruption laws could result in penalties, restrictions on operations, or damage to reputation.

Management's message emphasizes that the Company's unique culture, centered on its employees, is a critical component to continued success, with management's focus on building and maintaining a global corporate culture and an environment where well-trained employees and managers are prepared to identify changes as they develop and to adapt and thrive as major trends emerge. The strategic plan is to achieve long-term, sustainable, and profitable growth by focusing on the right markets and, within each market, on the right customers that lead to profitable business growth through the aggressive marketing of service offerings. Key strategic priorities emphasized for the period ahead include ensuring base-line strategies for air, ocean, and customs services lead to growth at sustainable and competitive market rates; growing business services into and out of Europe with particular focus on certain defined markets; and growing the customs brokerage offering throughout Asia by leveraging strength and expertise in customs brokerage services and developing critical talent, processes, and tools. The Company believes that focus on hiring and developing a diverse and talented workforce with an emphasis on exceptional customer service, along with its incentive-based compensation program, enables it to achieve superior financial results and provide for ongoing career advancement opportunities.