On Monday, Seattle-based freight forwarder Expeditors International (NYSE: EXPD) released another lackluster quarterly earnings report, this time for the fourth quarter of 2023. Compared to Q4 2022, top-line revenue was down 34%, to $2.3 billion, operating income was down 40%, to $199 million, and net earnings were slashed by 28% to $159 million.

Similar large drops in year-over-year revenues and profits have become a common sight in the transportation industry as providers and intermediaries in all modes have had to deal with the double whammy of receding volumes and excess capacity in the come-down from the pandemic highs of 2021 and 2022. Indeed, Expeditors President and CEO Jeffrey Musser was quick to blame COVID and more recent geopolitical uncertainty for his company’s performance.

“While ocean and air markets have been recovering from the massive disruptions brought on by the global Covid-19 pandemic, we continue to face further market uncertainty due to the current conflicts in the Middle East and on the Red Sea,” Musser said in the earnings release.

Unfavorable year-over-year numbers are forgivable in the context of the aftermath of a pandemic when goods spending and shipment volumes were inflated to historic levels, transportation capacity was strained, and rates soared to the moon. The problem is that blaming COVID doesn’t tell the whole story of what’s happening inside the Expeditors organization.

In fact, Expeditors is underperforming where the company was five years ago, in the fourth quarter of 2018, well before the pandemic began. Since then, the forwarder has barely grown top-line revenue, from $2.24 billion in Q4 2018 to $2.3 billion in Q4 2023. Through generally higher rates charged to customers and better buying power, Expeditors generated significantly more net revenue, which increased from $681 million in Q4 2018 to $764 million in Q4 2023.

That net revenue number is important because it indicates how Expeditors is performing in the freight market itself — it’s the top-line revenue of the freight services that Expeditors has sold to shippers minus the cost of purchased transportation, or what Expeditors has to pay steamship lines to actually move the freight. If “market volatility” or the “depressed rate environment” were causing poor results, it’d show up in net revenue, but net revenue has grown by $83 million over the past five years.

Expeditors is making more money by selling high and buying low in the freight market, but its bloated organization is consuming more and more of its margin. In the fourth quarter of 2018, $681 million of net revenue was good for $217 million in operating income and $179 million in net earnings. But in the fourth quarter of 2023, $764 million of net revenue yielded just $199 million in operating income and $159 million in net earnings. In other words, $83 million in additional margin resulted in profits that were lower by $20 million.

Musser addressed higher costs at Expeditors in the earnings release.

“As a company we have continued to remain focused on bringing expenses in line with revenue, as shown by headcount reductions,” he said. “Compensation remains our second largest expenditure behind freight costs and is the area where we know we can have the largest impact from the standpoint of controlling expenses. We also know that there is more work that we can and will do to control expenses moving forward.”

It’s worth looking at how Expeditors’ workforce has evolved over the past five years. Total head count has been almost flat, growing by just 2%, from 18,081 full-time employees at the end of 2018 to 18,452 full-time employees at the end of 2023. But there are proportionally larger technology and administrative — i.e., non revenue-generating — workforces: “Corporate” grew by 15.6%, from 352 employees in 2018 to 407 in 2023. Most strikingly, head count in “information systems,” which presumably represents highly compensated data scientists and software engineers, ballooned by 38%, from 912 employees in 2018 to 1,259 in 2023.

It appears that Expeditors’ rapidly growing technology organization is eating its margins. Yet this is one area where Expeditors is not right-sizing head count, but continuing to invest: At the end of 2022, there were 1,173 information systems employees. Current job postings at Expeditors support the notion that the firm is leaning into a tech-heavy workforce balance: There are 57 sales roles currently posted on the Expeditors website, some of which are more than six months old. But there are 32 openings in information systems currently posted on the website — many of them amorphous project management jobs requiring “Scrum Master” certifications — and 28 of those were posted in the past month. Expeditors leadership is hell-bent on filling its roster with more middle managers in its already-bloated tech organization, to the detriment of the shareholders’ earnings.

Expeditors is making less money than it did five years ago and should at some point consider that there are reasons for that other than the COVID-19 pandemic, which is receding in the rearview mirror. Other large third-party logistics providers have made bets on technology that yielded poor returns; a failed $1 billion initiative at C.H. Robinson ended up costing CEO Bob Biesterfeld his job at the beginning of 2023. A renewed focus on revenue generation and operational efficiency might have a bigger impact on earnings growth than another class of newly hired Scrum Masters.