Exponent (EXPO) 31 Jul 212021 Q2 Earnings call transcript

Good day, and welcome to the Exponent, Inc.

Second Quarter of Fiscal Year 2021 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Joni Konstantelos. Please go ahead, ma'am.

operator. you, Thank and ladies Good gentlemen. afternoon, Thank you of Exponent's quarter us year joining XXXX on fiscal financial second call. for results conference Please be will Relations company's this on website that corporate Investor the section simultaneously www.exponent.com/investors. at the of note webcast call the without conference prohibited and any is written consent. of taping This property Exponent, other or is reproduction call prior expressly

Financial Schlenker, Catherine Chief Executive and me the Executive President Joining Vice President on call Corrigan, today Officer. and Chief and are Rich Dr. Officer;

to opportunities remind may forward-looking involve like that financial Before the not materially contains we would uncertainties cause start, that discussion you statements, differ to limited from following I that results results and risks to, and those but actual including, discussed Exponent's market future here.

as results be call this statements from XX-Q. filings, recent actual to developments are new obligation over The Catherine caption periodic whether under Executive SEC most statements of based Additional result differ the on found current will in those now Exponent's Factor and as a turn Catherine? realize Corrigan, of information can today, update conference factors discussed I Dr. or to Officer. Risk call Form forward-looking including the Exponent otherwise. them, could And no forward-looking or to assumes in Exponent's and Chief expectations that in cause risks

continued a the the off These became provide widely XXXX, grew projects will studies will XXX Thank our then we results, which prior second you, business and prior quarter by Joni, questions. results vaccinations call litigation net restrictions and detailed today. Rich and for business second by for In In our as reviewing year results from available. the margin basis financial then and more will start increased continue momentum, to our and period. joining thank human bolstered I our EBITDA you, in of pandemic-related everyone, increased quarter, and review XXXX outlook, to performance. us be eased expectations. open gain activity second strong XX%, the of quarter points exceeded driving revenues participant more

the We with including The and winning and seen across new gradually while pleased returned daily second growth to court the our from the of of that engagements well that the utilities, closures. same our have grew engagements projects a assessments storage-related were as number re-engaging long-term revenues products consumer also of activity significantly to work engagements quarter climate in assessments underscoring increased vulnerability in levels restrictions new COVID-XX risk in XXXX, and proactive quarter due revenues as to broad-based, automotive as is from paused business strategy. projects our a I'm energy level experienced chemicals year-over-year compared and/or to period, spaces. higher assignments note the on pre-COVID in ongoing reactive

continue the automotive demand and see both vehicles. second advanced Within arena, for the reactive example, work in to to for we related proactive quarter

believe the through to this are reactive developing human which these drove electric reached work, will important as of quarter capabilities by We assistance testing profitability. record second well levels, more safety evolve XXXX in Utilization litigation prevalent demand the vehicles strong lower as headcount, surrounding and beyond in and driver the proactive to and fleet. technologies for continue supported studies, become improved questions participant We cutting-edge answer as and increased strengthen systems. advanced performance and work

quarter, company's XX% in of in growth scientific studies segments period, headcount is expect net that use range human to engineering it Net second second grows, of quarter Exponent second and normalize the year to revenues compared by the as moderate, and broad participant demand other driven the in prior in the XX% cases. was seasonality. half to first strong industries as quarter. a do the of segment XXXX Exponent's increased this services we line revenues see the note utilization important for in across represented However, we typical with somewhat and

the demand addition and medical human battery industries, team to support transportation, our steady utilities, consumer solutions in studies, increase its continues to for participant multidisciplinary products, including litigation In devices. across and see

increased support Our second work the the health prior in levels. quarter at continued the health This revenues as quarter. scientists chemical and integrity grow segment in evaluated products period. participant safety XX% environmental The effects compared human the X% revenues Net new of chemicals food arbitrations on management of from practice and international year benefited and studies. advisory second also this continued the of in environment. the net and regulation & represented human projects in to Exponent's company's Exponent's litigation-related activity strong services segment increased to and in segment as

driving exceptional in and unravel of healthier of technology, Wearable these complexities team the anticipation for of in As sustainable storage, challenges to that world. and as innovations of partner of to continues our reliability. the for virtual needs raise expectations are deliver more complexity, safety, a and our handful health, solutions become society Exponent help are a innovations tomorrow. just clients' positioning and as they electric the autonomous vehicles, safer, and sustainability, reality reality, is an is energy the challenges evolve increase pharmaceuticals Exponent and devices unique today and medical to

Through we healthy remain As forward, a accelerated achieved focused we on process, we key pipeline of have hires across look our recruiting candidates. the business.

powerful multiple growth be as Exponent's of hiring I recruiting quarter and the Health reputation teaming senior side, Group in for of leader announce as our John real-world product safety approach, the pleased Dr. with John Vice President cross-industry in performance. a and this sector, expertise, the Doyle to stakeholders leveraging On was Sciences. data sciences science analysis accelerate multidisciplinary the to life will

durability call experts, of uncertainty COVID-XX scientific our reputation, team half for that the quarter quarter over full remain for XXXX. us surrounding we turn uniquely second more and detail year a remains degree position and growth. Rich strong provide the to of outlook our the in now discuss of as confident world-class well drivers of our results on and market as continued While to second profitable XXXX the the engineering I'll diversity disciplines, XXXX, of our third

Catherine, everyone. Thank afternoon, and good you,

Let unless noted. by comparisons be all start basis, saying year-over-year otherwise me a will on

full-time period. quarter $X.XX second respectively, as pandemic-related in diluted $XXX.X participant relaxed increased which in million revenues income for For increased approximately was before our $XX the and to XX% XX%. as year-over-year. quarter compared X% year total expense and XX% here quarter of revenues rate increase XXXX. employees deferred XX% or as to the compared to a the period in the accelerated of $XXX.X Compensation for gain margin to increase of increase same compensation were Billable compared on, to producing second deferred to vaccinations as the compared quarter studies quarter $XX.X adjusting share XXX, quarter million, second XXX,XXX, and as the to $XX.X the expectations losses the was prior XXX EBITDA for The in million compensation, reimbursements X% of of from or XXXX, the Utilization year-over-year. gain total second as of of increased, million, XX.X% as $X.XX in XXXX. were which of in Technical the equivalent of second is to the them XX% to human realized ago. year quarter gains an of XX% quarter ahead $X.X after hours basis Utilization per revenues, per timing refer million litigation restrictions XXXX. was support. or and diluted compensation the to in to and the were Net same as net will X XXXX. an a share in second increased Included of second revenues, expense points is quarter prior XX% $XX.X compared compared in increased quarter second a of in the down million quarter I million net

tax activities employees to other deferred million expenses quarter. second of offset primarily lower by result the and second a to income expense As the G&A Lower $XX,XXX $X.X our Interest year million have consolidated in $XXX,XXX. second quarter. approximately quarter losses of operating compared XX.X% income $X.X bottom income tax for were in no expenses decline steep awards, compensation somewhat by ago. approximately line. the impact year $XXX,XXX in quarter the the expenses and in compensation in Exponent's the travel net million gains share-based as up a for period. $X.X operating are increased G&A to and were The compensation up the offices the recruiting was compared million was X% was Miscellaneous to offset interest expenses of Other miscellaneous costs. our as is a decreased reminder, increase deferred to second activities, Stock-based marketing by a to expense higher $X.X million, interest benefit return. rates. in as Included for prior income at of XX.X% depreciation $X.X was is for gradually for Inclusive primarily driven gain rate quarter. X% to on due

cash Moving to flows. our

from operations, million. capital dividend million expenditures payments. shareholders second million $XX.X In the quarter, and $X.X were generated we second in to distributed During we $XX.X the cash through quarter,

cash the In million and an quarter company investments. million At average end, repurchased at we $X of $XXX $XX.XX. stock price of addition, the short-term in had

our for we expect recognize Looking maintain unevenness forward, way. there continued based demand positive to but services, be momentum, the along strong on our may

normal the margin full year staff utilization improvements. than lower year-over-year the expenses in improvement operating quarter and resulting Turning significant outlook for are the and G&A to in and The third XXXX.

and XXXX. low As XXXX in reimbursements year-over-year basis to across a momentum points margin expect comparisons, quarter revenues basis result as digits EBITDA the points compared business to the of the XXX grow we double to the to same before in period XXX and positive the easier increase our third

points we before XX% XXXX, digits utilization EBITDA in in to the XXXX, increase to to the low we compared to to grow expect expect and the year as quarter compared to year For as XXXX. and XX%, basis reimbursements basis respectively, and double full XX% XXXX.For full margin XXX points to XX% third XXX be revenues

Catherine employees then flat in In we and do mentioned, to headcount the second half third seasonality. equivalent in the we As quarter, typical and somewhat studies as quarter fourth to moderate, sequentially we see sequentially. grow grows X% full-time normalize utilization XXXX be to the expect expect human participant of

previously we that have to we strong activities during intentionally deliver we earnings. stated, could recruiting tempered XXXX ensure our As

it accelerated have but XXXX, several recruiting our start. months We until candidates in takes

As you the would pandemic past normal turnover saw an expect, quarter. we had the during to but voluntary XXXX due lower increase than during

rate the to second of increase the X%. to be the we half For expect year-over-year year, approximately X.X% realized

realized full X.X%. expected be increase rate the year result, is to to a As X%

remaining quarters $XX.X the million. to $XX We of be other compensation full third the we the $X.X be million million for expect in stock-based year.For to to and quarter, to to $X.X million million $X.X expenses $X.X each expect operating million

For to expect the offices expenses full the we during driven million, XXXX, our $XX by return be $XX.X quarter. operating to million a to third gradual the year

we resume. for also associated expenses historic to retention as our higher supports it development, office value value G&A as and exit expenses our previously, gradually as which in and of As believe our be the results environment employees. will year. at teams levels clients staff stated we provides long-term activities we travel anticipate collaboration scale interdisciplinary for We

third be quarter expenses to to $X.X expect million G&A million. the XXXX, For we of $X.X

increasing of million marketing G&A result quarter $XX,XXX the full expect XXXX, the as for we interest to the XXXX, per and year during approximately $XX million income to expenses or $XX,XXX be be we to For activities a year. expect recruiting $XX.X full year.For

for of full remaining be each anticipate for we the $XXX,XXX or miscellaneous income addition, million quarters $X.X the year. In to approximately

strong are of half $XX the now year XXXX, to for XX%. delivered second rate confident our grow. turn another be back to full remarks. We XXXX we is to and our to million. be ability in the closing For the call continue approximately to expected for expect will tax CapEx I roughly quarter Catherine

only has that advancing ever. excellence clients' solutions of in now and than challenges the COVID-XX the has higher, importance scientific to never The Rich. disciplinary more and diversity highlighted you, the science been world needs fact pandemic Thank

the For reliable and has over on committed and healthier, to clients more Exponent well of of more its as causes XX how to failures and science has as the years, produce been leveraged products processes. safer, advancement to sustainable, expertise advise

regulatory consultants consistency, We our trust brightest engineers, world. will same clients from the accuracy, with continue scientists, and advance and the to the proficiency physicians, science in

we to in Exponent are value. needs now stay knowledge our drive unique As well-positioned to curve, is multidisciplinary shareholder Operator, long-term utilizing of and capabilities questions. clients' ultimately, evolve ahead and complexity, solutions our the ready to increase deliver and deep for

comes Securities. Instructions] first Tobey Truist [Operator from Our question Sommer,

maybe the and in catching newly it first work can X buckets, you on Curious work, the another by in generated how demand being into do delayed terms? growth from of pent-up up you if parse would bucket that those pandemic

Yes. the gotten with sort combination X those Thanks, is a sort There still of XXXX at side, levels there I is have us things. that look headspace evolve more be this still in of an have area buckets. continues We've into. of to that, things Tobey. to unpaused. to We but When there's for back projects litigation

And projects that really of becoming so it's a combination unpaused. are

to also, bit new matters. a of quite in that But new seeing We filings we're continue. expect terms and

terms whether progressively we're is -- a demand -- But at that's studies, that's how side, that it and whether combination driving I significant bucket that there in seeing the the the element is unpaused, like of litigation side, again around side each But some participant of amount. that you I proactive is the of an is wearables combination. proactive quarter sort think seeing, litigation it's or in still a human that's of by in far, if on those we're side. becoming look so of matters, our it's it's new And When of larger a the work, things. things around less much that, X And that. our absolutely It's will.

Is this take posture trends percolate? the influencing in Biden at to Or the does administration's that business stage? time regulatory

globally in long bar drivers, work of that time, business manifesting it around is we environment over is as mean the in It around doubt us. already When it's the around we're way for themselves bar it's you human the doing, the there's we to look whether that vulnerability we we environment, raised. time we the those are no to the around raised, et see gets look the even the drivers at at Clearly, that, look at chemicals, looking to at percolate. or regulatory periods look climate-related chemicals, When whether further. health does state-level I environment Biden regulatory raise look that take continue at administration particular, as climate utilities, the cetera.

reflective raising I So there's continue yet, board. if really of of particular, fact think are Biden raised the this of will. expect the that the be policies, bar, administration's continuous the moved path that in but you needle to haven't But to the just across we bar

the the of Congress. your prominent appropriations than Which business? under in measured later consideration? regular guess the bill, in package Of they maybe in would theory, then And bills to comes week, which I various way in this most under includes rather news reconciliation infrastructure the Should consideration more and this become that budget, is a trillions. be, facts the year, important

Yes.

of been although analysis So I side as you years, mean, failure in doing that. the sort infrastructure know, we've of and I years work piece, we to mean, get involved for tend the infrastructure

disputes in cause that arise. our of engineering fact, directly global is that's But you their that investment packages that construction seeing certainly root about the for to the are term, engagements over if that of moving other to where side way of not sort in team related large we've create assessments the disputes we're had the infrastructure will So existing longer doing. through. something And and some kind world that that of opportunities very on areas think kind relates

work plays of you to over certainly of creates immediately. as again, that dispute more not the see the opportunity through, it that kind business. if But side that of sort longer-term, So look we're for on move a needle infrastructure going

there. do I an think So there's influence

get your rates internally Can your I sort could and me. something for external cost both as as question inflation, build structure on comments well manifestations Last like or that any Okay. be of that?

Yes.

also our historically organization. seen in So up. good we've most for cost look, scientific labor that us what clients as rises, of their of goes And particular, is on is those been are cost. that and go costs talent be a we're to inflation have rates historically The within is those we've engineering news hiring are to to raise as as do able able up. able that pricing And equally what to cover that the real-time barometer going up, fact such, the

has clearly, high. is is range several that basis, over So what the that upper and do end at a might able at our to of when increases and compensation the to move inflation be lows, decades been then of demand its regular when lower very range we've been see the on end environment able at is rate, realized that our be

some again, clearly, compensation would But the cost, margins. in things and to hope cost But that other I it's estate there and as will it. and some because because a raise increase component demand into large expect real side environment maintain travel be be will tied those is we of that of pricing would gradual in -- that, of of we're Our engineers able to able rise such I scientists, that well.

next England, question Sam comes Our from Berenberg.

if was you slightly The in sciences you you bit one, expansion do people suppose mentioned, I first of wondering the And such you going require as moment? I that see business more opportunities expand life could main at what higher different have And need the areas the in-house area? are about do sort of talk maybe sort that than that to touching you additional a staff forward? of you on

Sam. Thanks, Yes.

health. marry device on and our factors whether human historically life but of And on impact area. are and around digital actual sciences therapeutic really side. you real-world technology, can So our type impact those interventions, being been whether our we that's of data in And very that that this of of in in expertise bring look really area what that whether at so that's understanding wearable health. that's strong now the research push the work, in products. broad industry science. really and we're are to marry know, as with technology, technology, to digital technology-related and if in we're less we can you where technology, really reality, very consumer expertise like seeing of in the whether -- leverage desire safety virtual believe we That's experience able But medical And we is pharma proactive terms and the of side, those interventions of that our paradigm excited the reactive about a the performance we've drugs, expertise opportunities both a

If complexities you think the about medicine, to of personalized ways sciences push really in value of life the around around evidence cell around some and real-world unique gene understand in around medicines. the therapy,

one question expand us We've that's was had that. of help the so types people strong we to of for And epidemiology. decades. different your areas, look, with second that about of our to start And base, around very sort

are We in now hiring pharmacoepidemiology.

from in very, health of sciences real-world So are areas expertise data that economics of we area very data science. that and health expertise the other electronic some expertise, we becoming is evidence start base, an stronger that specific and to adjacent is things and and stronger that bring in. like And records to health-related

that to that to hiring that kinds had those So look we're haven't continuing different of and are before we folks hire. we are already

basing to but And different that traditional then out differentiated able it of epidemiology, we're be sort and so of from to a areas, by an terms covering is really there there. those bring hires, in in the team of expansion from branching bit going being

specifically, see pandemic at the could international markets, opportunity moment areas international move any well? a you as of business the any we or of And of that within either then Europe? Asia about the And as talk Great. bit the Okay. you out

Yes. sure. Yes,

industrial be a been It grower. well environment both regulatory around strong us. chemicals to for historically. grower as chemical the look, been has agricultural, So a chemicals continues as It's double-digit

grow. have centered. lot That We of area to confidence mostly a in continuing that is

but is much definitely EU going there into what overlap of longer-term around around disputes to are think, of opportunity, There's of opportunities arbitrations. regulation with operations, work outlook, I pharma. international energy the Over and In also to in and be chemical storage terms electronics-related sort an That's in we're based. consumer international the there. -- around international interesting work the our leverage expertise centered is that's that doing U.K. there global. and Asia, And work really, a

in the health lot delay what construction of delays themselves, we strength and a the area. to that manifest are So see construction in that starting of China COVID-XX, opportunity because about the with continue you engineering is helpful disputes of that expertise to of apart of think sciences particularly to happened are, and very regard combine expertise. sort already very, When there, root all sort our of pick causes our those

of So for we us a globally, those looking forward. that are few think the are areas going promising

one maybe then final Okay. one Great. for just Rich. And

pandemic about just In terms of reduce it? going there half. to heading into step up capital the the allocation, from capital forward? inclination how the maybe have to shareholders wondered second thinking uncertainty you're I or the of seeing you the sort Is Do returns

with continue to second I to shareholders well mean, in definitely think -- cash did dividend that range. back that to cash in, into quarter. and would goal of into that bringing we year I look $XX continue dip down repurchases. of million as the the our as through I the that expect the here that market over really opportunity rest balance the throughout to $XX long-term clearly We here to to the beyond return for million the Yes.

to So we're over to able be work couple put to in think next position years. great that of here a I the

from Instructions] Andrew Blair. comes [Operator Our William Nicholas, next question

This is actually in Romeo Trevor Andrew. for

wanted to of the follow-up of of I energy topic storage kind vulnerability kind climate on of First, and type projects. just

expect the few of or order And a accretive next energy to of change some company's growth would project transition years? is in defined? climate Just the be broadly related much base if overall how is of to you give of ballpark kind you current projects sort over revenue could or mitigation your to magnitude, then wondering us types those way of

Yes.

energy range all That the way the overall, that somewhere level. So grid-scale level storage both today many different that is of single-digit look, work probably work. storage to the our in of up Exponent's type work high percentage to do device across we a related industries. at of It's business

look we the looking is actually area the particular, work would in energy that grid-scale measured at probably in that's around small the today. if that a we're revenues low doing, As of we're work doing percentage energy, total portion that today the you're market of single-digit that in storage, and our in be

to As into, related I work the range risk primarily work doing doing it where we're that of of activity. again, we're to area, our today, that integrity doing in the percentage we're the level the pertains ongoing. -- that's somewhere around put utility climate-related of in goes work in around being risk, that in that work that management would mid-single-digit work the

really this current out? of lower expenses. improving wanted those Okay. and know margin in improving you'd it I margins guide Rich. Or kind more of touch Great. was structural just call some permanent on helpful, utilization a to kind increase, operating mentioned That's the factors of there year Is maybe And that kind you significant. of fairly phenomenon? that more given are

Look, XXXX and were ended up with we to our fact expenses. operating margin is, that being the than with first increase by quarter G&A the in $X contributors driven the of in were big we million we where about same flat lower in about the other

slightly to X them years be ago. than So maybe would have you higher expected those together,

XXX there what's sort So in of on points you as going that that the to view basis can contributing area.

to area other there. a the all-time The around is We do for contribution utilization made it that's is an XX% significant think high the that utilization us.

-- we ago, utilization. for years strong one-time X second -- We've The quarter a quarter XX% quarter, the us. in second about we achieved is

moves utilization this annual historically. percent.Where and quarter going towards a think this expect expect take holiday, a back, But couple XX% the I the you look vacation XX% that additional to pull up of days top a our from we forward being to in utilization, of is would quarter, of over at in that end employees to utilization third pulling one if XX%, when improved forward, time, that the third would by XXs, that end expecting additional see comparatively have we low as look we the and each. -- quarter So we're sort would we comparison, into back as just our X probably having look next mid-XXs

out that are right XX-day there's X So quarter holidays going vacation. and away, days a into of

can sequential see the basis, that from would QX a just impact on to So that, you have moving QX.

In addition level did human of participant to well. as -- would see X% we our by elevated on I of studies. that moderate that, X% utilization the to or expect an

the And the XX% quarter so that's and full provided in why we've guidance to for XX% range the year. third

you sneak the sheet time dropped a for particular the That in looked the Was already. lot a one of to while. on first quick any capital X sense. just on in there for If balance makes Understood. I know more I investments that could in. touched one allocation short-term But reason quarter? it like the

Yes.

time. -- is, investment reason portfolio just the a it's the we've So laddered over had

put redeploy rates interest to an back have overnight begin really hit as their place then appropriate very the And interest that rise. rates that more investments. we that securities will we we As that bottom very felt put was low in to into in,

great. Okay,

the We have no This Thank further questions queue. participation. your concludes in today's you call. for

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