Exponent (EXPO) 27 Apr 232023 Q1 Earnings call transcript

Good afternoon. And welcome to the Exponent First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]

is event this note, being recorded. Please now Joni Konstantelos would like to to over conference the with turn I Investor Relations. Please go ahead.

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

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

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

statements information recent that found Risk cause to periodic actual in in the results Additional from could XX-Q. filings, most those Exponent’s under factors can Factor Exponent’s caption discussed be Form SEC including forward-looking differ

assumes a statements obligation revise or this and risks Exponent are update call on to otherwise. expectations result as of forward-looking as new today them, and conference whether current or of The based in no developments

And the Chief over call will Executive now, turn I Officer. to Dr. Catherine? Corrigan, Catherine

the everyone questions. us detailed quarter will I financial today. more call open you joining and our will by for provide thank performance. business and XXXX first results and Rich reviewing of for we off Joni, our you, will then Thank review outlook a start then

revenues evolving challenges to report and another uncertainty. net by X%, over despite pleased macroeconomic We solid quarter, are growing

product diversified offerings, our cycle. range the life business a Our the the across with of broad results entirety portfolio of strength of a of industries serving demonstrate

excellence, of the adviser, envelope and important positioned the business clients challenges. new their our engineering power a innovation health to diversity the trusted as Safety, and environment harnessing push disciplinary remains objectivity with as help Exponent are technical increasingly solve deliver and science companies technologies. uniquely toughest and

which Exponent litigation-related foundational the work product the to Increased for as saw our recall of safety influx well first industries. our bolstered reactive services, and growth demand as that spans inception, have in an quarter. activity, In quarter, our been we from multiple related

proactive the primarily utilities, was in chemicals, the work automotive products, sectors. activity On and sciences life side, the driven quarter consumer by in

demand and well Turning domestic our strong related more detail. our as we as to litigation international Within work, in energy property for sectors, reactive intellectual disputes. our transportation the engagements involving business, and arbitration both saw particularly

engagements end We around recall across also and saw increased a product life transportation including sciences. of safety and markets, number

asset engagements driven product business, industries, the and and work. by and design quarter issues medical across integrity electronics device proactive in our spaces consulting related regulatory risk multiple were the in Within primarily

to machine differentiated performance and and is continued demand across markets. designs. collection ongoing seek end to experience Engagements learning they their data from and This work advanced next-generation user reflective of clients as related research our user reliability of product a improve data range of

positioned concerns well years. several the trends, in and including have health safety, on that to is business, Across over next environmental impact capitalize significant Exponent the business our a macro on will escalation

automation, work these innovations consumer are for with continue electrification associated transformations as energy about vehicle digital drive We to excited our storage, health, complexities services. related and and the will electronics to

expand our are with understanding and business. capabilities on We the focused what grow our the client on base relationships to is positioning and intently talent, horizon and are ourselves

grew headcount driven our by quarter, and attract to our the talent. XX% year-over-year, ability retain tier In top

of who disciplinary our and objectivity, for Exponent diversity. scientists because brightest choice choose engineers We employer and technical of are best an reputation for esteemed the and excellence,

year, our our our which with We needs the team the last unique dynamic and clients. to world-class position accelerated efforts of our have committed to pleased strengthened are growing complex over are meet recruiting and

utilization team the that always, long-term we of strategically our our for balance all any are to over ensure expanding positioned to to stakeholders. will we market continue environment value As deliver with correctly for

Turning Exponent’s utilities, represented the revenues our increasing across the segment engineering XX% to scientific demand sectors. as and strong prior period, in segments. products life the other of to our net year continued and with compared XX% quarter, our sciences services first transportation, for consumer

in health this to Exponent’s same the our year. net prior X% the compared Net quarter. revenues XX% represented of environmental the segment period segment and in in first decreased revenues

the the of segment Excluding chemicals segment the quarter by health impact year and of primarily evaluating on to X% environment. was as Work the in first and engagements, impacts environmental this health driven period. human Exponent increased prior the exchange, foreign the compared for safety-related net revenues in

Before website, and to more designed newly world. I want Rich to healthier sustainable the a do we I recent underscores turn review which launch call financials, over the create highlight are helping to clients safer, of Exponent’s the how

and disasters challenges, profile showcase our who people work diverse proud the collapses, the incredibly spills and chemical experts assess biggest are our of world’s building product helped impactful of of We to failures. some including team have and high and

most combines with a urgent challenges. vast our profoundly unique, that experience array help to team of build solutions clients engineering future-focused expertise world-class unprecedented, for scientific Exponent’s and their and

our exemplify model, depth of the quarter unique client Overall, our strength business results of market position adaptable relationships. and our first

will future, ourselves and to position clients to shareholders. our our in the skill investing and our talent, knowledge value increasing for We to continue deliver base

full quarter over detail turn the as outlook and XXXX. more to quarter first call Rich I results, well will now the the our provide our as discuss year on to for second

Catherine, you, and Thank afternoon, everyone. good

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

respectively, before same quarter’s exchange. The impacted refer net XXXX from negatively to X.X% reimbursements I or from million, on, compared as first $XXX.X and $XXX.X XXXX. as will to total revenue increased of growth X.X% revenues, and of quarter the revenues period revenues them The million by here foreign was to

million diluted share decreased or quarter prior year share, compared the first $XX.X period. the or X.X% to to per diluted per for $X.XX income $X.XX Net in million $XX.X as

or the compared realized for tax per share $X.XX quarter, Exponent’s with of awards benefit quarter share-based Inclusive benefit compared The share, $X $X.X X.X% XX% diluted tax as period quarter or first was awards, diluted was to as the the per associated first million for million of accounting $X.XX in in to share-based the tax consolidated in for first of XXXX. XXXX. rate the in same XXXX

of quarter XXX,XXX, year. in the to the for were Billable quarter a prior an million, -- X.X% hours $XX.X X.X% EBITDA XX.X% the revenues. over of first first approximately margin quarter of producing net increase increased

employees of XX% year is increase as This our first technical average recruiting the full-time rate to exceeded one in compared which The very equivalent were expectations been has ago. as quarter and our improved. retention successful X,XXX, an has

down quarter was of from same XX.X% in first XXXX. Utilization the period in the XX.X%,

headcount utilization to expected down was strong the from very last in Utilization in to which its year. corresponding quarter of lower We elevated decline utilization. due step resulted in level the growth, first

We are pleased our to in have with margin delivered line guidance. EBITDA

losses X.X%. the rate the period The and compensation expense quarter the realized for gains a compensation adjusting to compared approximately year was same as first after for deferred increase X% In increased in first ago. quarter,

period a compensation in compared $X.X is Included loss same an of deferred as million of in XXXX. compensation a the gain expense of This $X.X to swing. total $X.X million is million,

As miscellaneous bottomline. in impact no reminder, income on and compensation the have and a gains offset losses deferred are in

as to period. in million prior the $X.X expense the was compensation first Stock-based compared $X.X in million, quarter year

expenses operating operating were to to by is Included million, primarily other activity XX.X% for offices. in depreciation employees first continue $X.X in return the of Other as million expenses quarter our driven expense $X quarter. up first our increased the to

to XX.X% up G&A marketing quarter. activities million were The expenses primarily $X.X the in-person recruiting activities as first to increased G&A expected, expenses increase was As in increase. for due and

for to interest income, rates. approximately the quarter. deferred an driven quarter, the in Miscellaneous comp first gain increased income by increase first $X.X $XXX,XXX million excluding was the Interest in

expenditures investments. capital shareholders million million short-term first were and $X.X We quarter million dividend During $XXX.X $XX.X through the in to and cash the distributed we ended payments. with quarter,

outlook. to Turning our

unchanged. year full is XXXX Our outlook

prior, quarter, to and low-double XX.X% to one reimbursements the of the as margin digits compared to XXXX EBITDA in high-single to to expect reimbursements. revenues before For second grow before revenues year XX.X% we be

expect to XX% in XX.X% digits prior, before grow be XXXX to reimbursements. year For we to reimbursements the to before as high-single EBITDA revenues and the low-double full compared of to revenues the one year

We to continued have our efforts. recruiting from benefit retention and the success of

technical equivalent to as a expect full-time year-over-year. to each grow of grow employees we XX% result, sequentially quarters, a remaining X% XX% will to X% result, As and the FTEs

to second quarter in as XX%, will quarter in Utilization utilization XX.X% be quarter the last increased the headcount. to in compared the expect the tempered by be continue to We year. to XX% second same

mid-XXs sustained in to headcount XX.X% We full utilization as still we year utilization believe market as our to XX%, achievable balance to the demands. target to strategically be based long-term of expect XX% XXXX. We on is manage and continue utilization compared

to be expect We XXXX X.XX% X.X%. to realized year-over-year rate increase

We expect realized that X. on rate that April same will begin for our annual the salary approximately be increases

the we expect $X.X For be million $X.X to compensation stock-based million. quarters, to remaining

be full to $XX expect to stock-based For we $XX compensation million the XXXX, million. year

operating quarter, $XX be $XX.X to For the second other we expenses million. to expect million

as full the to and be For $XX.X grow we to return our expenses headcount we year, $XX.X to continue expect million offices. to other million operating

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

full be expect million. $XX year, to the we to $XX.X expenses million G&A For

XXXX. the As very low first a in reminder, travel was of half

and development expenses G&A is the travel. related to So increased in recruiting, business year-over-year headcount, growth

interest to $X.X per be income in XXXX. quarter expect We million $X.X to million

In quarter $XXX,XXX $XXX,XXX be per to income quarter. addition, per miscellaneous we anticipate approximately to

do share-based remainder the tax expect not associated benefit For awards. of XXXX, any additional with we

will the $X.XX. diluted earnings year-over-year year-over-year So by reduce share $X.X the tax income benefit and awards with associated net share-based lower million by per

benefit XXXX. exclusive XX%, For as rate, approximately XXXX, to of to tax compared expect XX% our share-based for in be tax awards the we

For approximately the compared XX%, same to as rate XXXX, year be XX.X% expect second quarter we the in of our to a quarter ago. tax

in the benefit tax full the share-based including as compared rate, tax XXXX. to XX.X%, the expected be XXXX, with awards XX.X% year For associated to is benefit --

In closing, another profitable remain positioned we well delivered our continue quarter growth. yet and to solid

call Catherine the remarks. turn for to closing back now will I

the of past failures safer, excellence, create with lessons Exponent to a Thank tomorrow at you, Rich. the world. stands and and scientific cornerstone more healthier engineering of solutions sustainable connecting

and our Our drive multidisciplinary well Exponent ability for and shareholders. strength. Backed diverse relationships, profitably demonstrate leading remain in our Exponent’s confident as position first our capabilities grow results quarter world-class to the value our long-term as by team, market, we in client financial

Operator, we for now are ready questions.

ahead. from question [Operator William first Please with Nicholas Instructions] Blair. Our Andrew is go

question. taking Hi. growth. Good afternoon. I Thanks with one on start wanted my headcount to for

be it lower why bit think even you broadly, Could the did demand on little what great? Just you any more environment like quarters? unpack a expected. strong previous attrition relative particularly maybe come there color in has you working that is you would thought, and Just success for driven other your than quarter, had to hired seems recruiting Exponent now you stronger there in in was the than

don’t start Why Yeah. you will back. I and give off there

So, good coming knew thought part headcount have quarter for look, strong over lined We of people we in the XXXX that up was we those back already momentum into we half and to carries coming are of that growth. a you had what in.

is, that that on of that that the acceptance we were contribution we ended of what percentage levels months quarter equation getting the that saw higher in XXXX. to approximate side, But access bit now were which on talent, net the both we included good little the of headcount inbound of seeing same we And seeing a from are four a level the occurred strong back point and couple sort the fact based pulling and retention to rate of seeing sides to rates that in to of first top led people what up the we quality side.

normalized our to March and months we period higher salary that and saw, we take to more especially turnover, been pay our short back time. pre-COVID effect levels out communicate and of reviews of we during we a seen would was middle those had level X, and April in as provide obviously, the first it’s So which XXXX a more what a in increases again, new XXXX, than, four bonuses

we couple both in these position next we the a are good go, how of see are in quarters will We optimistic but that areas. of

and a Yeah. the And us is that would for employee our around on Andrew, -- color value Rich little of I just just our really top strength bit of add proposition. what provided

has of we strong. level some quite It are an been. it’s always environment in But of uncertainty. think I

foundation And engineering and portfolio Exponent a to a scientific company with perceives that part strong interesting talent and of be they I this that want a work think as diverse a with of. exciting

strong. value cited, I think absolutely is that So aspects just we quantitative quite overall feel also are that there proposition the Rich that but

true you. like, sense. I Makes proactive side reactive stronger correct was And from me about attribute wanted and the related the your the If is of seems am in wrong, a this was demand Thank case, bit the for business. the market quarter. and that environment? to I there and to to then that has if that uncertainty, proactive change current ask you proactive what the kind my in clients would follow-up, side been that than any It

our sciences, for automotive, business areas. the very side strong Andrew, you of life our both well said, domestically. of the toxic work, related investigations that. Like Thanks, the internationally, some defect recall litigation Yeah. strong reactive in This as tort of around portfolio. It’s the quarter, as the is some very

are side, proactive to it we the be On variable clients. pretty finding across

regulatory The that are of sort that there. uncertainty of need don’t still critical lot industries in regulations doing like the have the environment. for in you electronics, say, when around a consumer or have macroeconomic medical let’s We work innovation that’s environment devices, got away go we

But seeing we is are be are and what are look, to resetting okay, quarter. this themselves got getting to it’s have quarter, Their have with the do we uncertainty. they layoffs. work, oriented but themselves Maybe some some not teams their had around they saying, this next maybe going clients

behavior work seeing reality are is sort that from bit that of right? moving critical a forward, clients, the we but So still is of little some that,

two items that going kind or where start for but of another have be be workflow we critical in those or areas the to we of part may we equation thing, got So month continue are seeing a few of a that there pause are us. to demand

you. helpful. Very Thank

are You welcome.

Securities. The Please next Truist question ahead. go is from with Tobey Sommer

out impacted would sure there? how to the and wasn’t -- rate start in and January I acceptance if increase What the any Thanks. realized there a retention nominal of question rate better sort was are I puts that pricing. of how rate, nuances, kind terms want the with numbers in the has of and be takes model? because what of

Yeah.

of based our the realization realized that our approximately what XX% rate X X% mix mentioned of employees we that there. was and out So that for that were increase on you the timeframe and approximately is here on was January who that

having. we So always because in portfolio. we this our had have are It’s not

individually that for each our set position year, a quite that employees and single push experience work through you how marketplace are based all in and and and each aware, XXXX. their on we have Tobey, of in continue to the credentials As calendar been for in have able is that rate the way of them remains that’s all clients to

down I new would here, move provided lot we stepping that the on in it are the bit a year blended rate which as is where have that had hiring and and quarter that of be. we we But in as the is why first a guidance down further little people, through

headcount, level, is, realize is and that school, where achieve with pleased their which PhD then hiring a are level to them entry that of quite up a over out especially us, career at realization in organization. a we new typically, top them typically are our bringing the in we because in growing principal But of hopefully the for little higher

is So time. we this what are at that seeing

in recent I EXPO those see sort uniquely a months, are seen when have top mind either consumer we in I Great. guess, you announcements verticals, do connection of days? for not in electronics, services curious, of but TMT, demand am these they in layoff it’s

Yeah.

and scientific with the regard other we tech clearly, environment larger engineering picture has the -- Tobey, that sectors. in the of with and talent sort sector tech that hiring see shifted to So, for

So for having we those to our with are talent. entities compete always

I on more goes same have an do there’s that where at needing off clients sort value time, situations We And we acquire are help hire this ability employee demand, have from the that really seen to about in the to an proposition laying impact to of back or consultants. past, unable that because talking talent. of the was are our before. But sort

We in the in the seen world. that regulatory past have

thus much sort the side, around so that far of seen of of seeing the acquisition. technology shift but haven’t our certainly standpoint from talent that We

are to around think technology as of resetting to can those layoffs before, innovation. I needs to I and relationships of said so These going after it teams, and sort develop series our we people we they are got is in early. that have a of continue serve all that develop ensure the

retention the and acceptance if it on and to marketplace so, hires based how external the brakes revenue? metrics the And on rate, the those opportunity do does grow if better the change I and gross throughout based assumptions you curious your see on year, higher for tap you am

Yeah. Thanks, Tobey.

So and strategically the cut the less seeing across of we going portfolio flat be the one to capabilities business okay, it’s and the to looking We and So where about, marketplace, really a we all right? at one our in have industries. need in hiring about our demand every got Board, the it’s our right? units, every efforts are are of take

electric multiple dials back we not we more example, This where is that because here, there and see ramp the right, softness, and example. of things, can strategic on we the to have that pull a I So where very according is say, have more right? so it’s we got up market. we talent, area different to tapping vehicles do other got brakes my I to we have got can an all is to are dashboard the in areas For But there. acquire great are looking opportunity

a commenced. it that whether Is a it does turmoil would time it’s but Thanks. enough But there the year-to-date mattered period on it marketplace after? the -- short too And sort before more has a side. calendar and proactive been time, the represent notice the and of did, I matter that breakpoint is in in suspect stretch if banking of long since SVB maybe to of

we startup Tobey, that organizations, entities banking have while relative seen to that Exponent’s change have with a competitors mature I really not engagements them. I of SVB their mature most we with -- think is realize had entities that or event haven’t and that clearly are

We and sort have are employees area move forward that it’s slower tech we little and I in have don’t think and those not past. with having are that’s seen on that our discussions our that engaged see the to in don’t had of a I clients where such, waiting market or hasn’t the not funding funding such to bit impact them and relative think I just been

as been that of suspect actually But majority for them. market I if But hasn’t our tell. which where you it this clients, up Time more our creates mature revenues, make long. vast open say, will the anything

question in the any last me. for of projects Last time portfolio change in you we and the heard Okay. Rich, composition the from versus big in P&Ls?

range. be We a that might in I in X% of No. have expect or to years that such of portfolio revenue or call are outsized be normal large such projects more have revenue prior will we more and at across No will sort time. had it going X% what range. something and in and in quarters of where we like X% normalized point The on this projects

So now no. right

Thank you very much.

our presentation. session you now conference today’s concludes attending Thank and This is question-and-answer concluded. for the also

disconnect. now may You