EXPO - Earnings call transcript Q2 2022

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Operator

Good day and welcome to the Exponent, Inc.

Second Quarter of Fiscal Year 2022 Financial Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Joni Konstantelos. Please go ahead.

Joni Konstantelos

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

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

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

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

Catherine Ford Corrigan

year-over-year were machine review questions. and broad second our by achieving quarter outlook and detailed sectors. and Within the call Thank reviewing more open XXXX storage quarter second engineering solid will our Exponent engagements the during risk integrity based, the growth and work quarter. you, will utilities, utilities, studies related for EBITDA, management everyone, in our automotive provide driven contributors we continued delivered and second to sciences scientific And performance. a start you, business during quarter for financial key expertise. thank the services, learning then Joni. off our related joining us by proactive for revenue results asset life data results, will products, then I consumer by Rich of today. our with supported and Growth work demand energy remained and

litigation-related safety work increased services saw we our recalls. product and related side, was robust, reactive to demand the On and for

growing recruiting to with that and we're committed team are are pleased world the our class momentum We increased experiencing.

pace the the past attract highest increased hires of months, underscores Exponent new scientific the Importantly, our and talent has engineering few to over to caliber team. which ability the

detail. clients increased machine to human Within Turning building product more as business, our with experience and our momentum and to seek demand learning from differentiated they our performance. of advanced reflective studies, engagements is user data in proactive factors improve

in storage diversify work batteries and we with to across are to mitigate safety space industries, risk. advising to frameworks continues in Our clients automotive the energy and regard

and we for impacts technologies. of seeing the We work our understand products clients better pickup help virtual these demand as are also consumer reality augmented the cognitive

and treatments. Our evaluate innovative wearable human of health and care be work the a and our monitor clients safety efficacy thinking products as core technical health to around technologies growth to expertise and leverage of continues driver

pharmaceuticals. while end challenges anticipation of around experienced the litigation-related markets, for in engagements deliver and tomorrow. challenges across reactive of quarter, up solutions devices product the business Exponent of in and Our during a including an today also the have medical increase transportation, work number recall to of safety is speed picked primed our and

on business the trends business a our capitalize significant health positioned to on several years. impact will over We in environmental are across well safety, that overall concerns and the next have macro

clients performance Our space, the the of within a particularly future. fueling experience energy across in the vehicle is around of battery and storage demand battery safety of and technology packs electric number

positive see health, digital evolving excited and work about encouraged also sciences devices momentum by in fueled opportunities and pharmaceuticals. life related to and are wearables we the with to We growing are medical

engineers scientists remains anticipate front, brightest strong we are business. to actively best increasing of as which into we the competitive year. for accelerate pipeline recruiting the headcount, attract second and successfully continue On Despite will in our we talent, hiring market the a technical the and our job half

in products, Turning and we segments, the Health second segment demand sectors. of continue for compared as life of Exponent's by to investments This the the rates, Engineering strong XX% revenues see decreased in increasing Exponent's Environmental to marketing automotive X% our compared quarter, period in Exponent impact well in represented exchange this the foreign across segment period as revenues the sciences utilities, Other same represented net services X% company's to prior and from second side. as net recruiting negative our health revenues the Scientific to the on segment Net XX% year. the and driven quarter. the consumer in currency and was prior-year

leverage our relationships, core client bring our As half firm. reputation, we will as we we the year, move to expand into competencies to of back and new continue talent deepen the the our

to maintaining results, and more constantly business We scale. sustained second technical and are call reputation encouraged detail meet quarter the verticals, our will our now provide XXXX. increased drive new in to third see challenges for our well growth Exponent market for discuss unique to position and the the excellence, and Rich and confident objectivity over of to Exponent's we full-year needs evolving diversity. I'll the our of emerging model Overall, our the that disciplinary growing and are clients, as outlook quarter on as durability turn to continue while

Richard Schlenker

everyone. And Thank you, Catherine. good afternoon,

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

the city. before foreign to XXXX, be compared was here or million I a the in second refer quarter in to and revenues quarter X.X% was to the $X.XX that as Billable for hours in slightly to for immaterial per EBITDA rate of Exponent's diluted will increased The XX.X% point XXXX. per was of diluted quarter share-based compared associated compared to in the And the period office XXXX. of quarters compared was $X.XX to closed revenues restrictions increased benefit XXXX. of For to margin the quarter XXXX Shanghai our XXXX. prior-year on, $XX.X the them period producing in of the approximately tax awards a XX.X% Net same our net of net eight consolidated of because reimbursements, It million, quarter for impacted as X.X% in revenues tax to XX.X% a income quarter to million. by X.X% the of due XX.X% of in second increased an an in same million down percentage from X% the quarter, of quarter headcount period increase X.X% approximately as Utilization of lagging XXX,XXX, share or year-over-year. with to which behind to utilization $XX.X of should or full of period. over quarter and time $XXX.X the translation revenues, elevated as with noted result $XXX.X million weeks the same in currency second increase growth total Technical $XX.X X.X% the were the increased six-tenths XXXX. was share Prior-year XXX second as XX.X%, the due pandemic the from as demand. growth equivalent is XX.X% employees in XXXX. averaged

second class XXXX. adjusting of losses to adding In our year period increased is gains Catherine million of quarter compensation compared after associated deferred The deferred was compared in the talent expense X%. with As in world loss losses expense plans. driven second and realized we as same $X.X compensation ago. experts. a investments total $XX.X of continue on Included mentioned, the top to as and and certain by team are in to These compensation gains for gain a compensation losses deferred compensation million of quarter, mark-to-market increase a approximately rate prioritize to for the X% gains

operating Other the return employees by expense recruiting, continued our during gradually Although the the expenses travel $X.X quarter in-person compensation to million. activities as million the has expenses were were quarter no net this activity up driven million in G&A on XX.X% it of other income, quarter, an $X.X person business at miscellaneous as in work. expense quarter offices, for the income. second including million was the accounting entry creates period from Miscellaneous is up increased quarter, X.X% to for for increased EBITDA the year. the expenses in $X.X to some is income depreciation was impact $XX,XXX Stock-based up $X.X compensation as Interest development. or quarter. for last same in $X.X to and deferred quarter. primarily was offsetting operating million, in $XXX,XXX there noise, Included Income marketing net in of

our to cash Moving flows.

stock common the generated and $XX.XX. an through $XX.X $XXX.X quarter, cash we million expenditures At the repurchased company million second $XX.X capital $X.X had In in quarter shareholders During and were end, from payments operations price average dividend of cash. million million the quarter, $XX.X we of distributed million. to of the at

for and quarter Turning full-year the to third outlook XXXX. our

third result revenues in For in year. This with headcount lower the because utilization XXXX, XXX before in quarter was behind we decrease digits basis the to EBITDA and lagging the elevated of points XXXX reimbursements prior is XXX margin compared mid-single XXXX to when decline to expect to to as margin grow demand. a as utilization compared

for September. Additionally, in in-person time we are the having meeting first managers an XXXX since

For the our we improving revenue margin and guidance. maintaining our guidance XXXX, are full year

XXX and to grow For as points basis before the digits compared XXXX. reimbursements full to to year, we EBITDA to mid expect margin XXX revenues in decrease the to high-single

benefit We efforts. from continue the success our recruiting to of

to year-over-year time As technical full third growth X% the employees we to quarters. be a equivalent in result, of and expect fourth X%

compared time increased in third summer the be meeting. the third tempered holiday as last will We reasonably and during vacation utilization higher headcount, in in to expect XX.X% Utilization be to by same the to and quarter months, XX% XX% quarter quarter managers the our year.

for compared in to full remains utilization XX% the expectation year XXXX. as at to XX% Our XX%

range. our build We our in sustained in average utilization continue mid-XXs that, be proactive work, increase practices as we critical mass the will believe our and to and offices

X%. For quarter, to to expect the rate approximately third increase be X% year-over-year we realize

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

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

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

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

For million. the $XX $XX.X operating expenses million we full be to other year, to expect

at activities our in our an development, staff scale basis. to resulting seeing as working we and higher clients travel increase. office office collaboration interdisciplinary location retention in for expenses believe for the increase of person are gradually a and and expenses business value teams on employees. supports G&A recruiting, regular in We also development our our will We return these as

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

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

include the in-person meeting these an expenses reminder, managers September. a at As of end

together, team long our costs million, valuable $X.X believe separation. physical this While of approximately bring after meeting such it especially a we is to period

be for We or $XXX,XXX interest year. quarter income expect approximately to per $XXX,XXX the full

$X.X In income quarter year. full expect the addition, to miscellaneous approximately be per million we for or $XXX,XXX

anticipate remainder of to associated awards, full-year the additional so XXXX, we be do $X not any with tax million. tax share-based For benefit estimated is the benefit

million benefit a awards tax $XX from As of XXXX. we share-based reminder, had in

net based value on the this million earnings diluted So from by awards issuance and tax The per awards share-based $X.XX. benefit and change $X reduce in difference the will determined share by of based between income grant dates. share is

XX%. half second XXXX, tax our approximately rate be the of we to For expect

is full-year tax full tax as the awards rate in XX.X% is XXXX compared to to to (sic) the year benefit of $XX inclusive CapEx XX.X% For expected XXXX. be [XXXX] share-based be for roughly million. the XXXX, expected for the

remaining the X, to Catherine the to another July for I Exponent our call positioned of solid delivered and share repurchase profitable million authorization. yet closing turn had continue remarks. growth. We well on remain back will now $XXX.X As XXXX, quarter

Catherine Ford Corrigan

Thank Rich. you,

Exponent over science scientific to our clients our broader the and employees has XX of For to the years, been of advancement committed the service to through community.

five safety, health clients years continue for profoundly and growth pushed growth drivers fueled decades, greater to continue and we market Exponent the need the be solve challenges. will over the will to of environment unique the heights, that expectations find and our confidence help the society's they of fuel past have to These clarity to As come. to that

trajectory, As for ultimately in complexity, clients' continue are and well and long-term now our Exponent positioned Operator, to to shareholder we remains ready needs value build our growth questions. evolve driving profitability. increase upon

Operator

will Tobey our And come Sommer Truist first question Securities. with from Instructions]. [Operator

Tobey Sommer

Difficulty] expected [Technical Difficulty] hiring. and [Technical complexion the in

increase picked I recent expect back represent months half even you an and in think up it the there. from to

Catherine Ford Corrigan

are despite continuing are on continuing interviews rates. the put to pressures environment we inflationary gas absolutely the on good months, to be But our that, over the to that to with we're regard We The our continues several there. yield hiring. finding foot see last competitive good acceptance and

hold continue those. We to

our university push are continuing to we recruiting program. So on

getting for year. mid-level been interviews, to are so the interviews and doing, level as terrific. into on in-person doing folks programs, senior and hires really have more looking than We we this been continuing get And our of back we accelerate now in half that's

lot And now. a of to order of there's we're momentum So that going the push on in demand work. continue meet client to right to in flywheel that our

Tobey Sommer

evolved in work? of been terms you Macro the Has recent behavior perceive there approach reactive in months. uncertainty in through and maybe proactive has versus of anything it changes could prism client

Catherine Ford Corrigan

on well. touch one as can I that

our that keep automotive innovate be automotive proactive happened by XXXX. innovation they find historically have our finding we of arena, to as fewer through to need an business with industry safety industry, don't we court driver the of continued going tendency thus with go during significant been business, are eye because litigation Not with an go of by But back constraints we to well recall. downturns, maybe even that exception the physical The past big driver. really going. is that the environments Those are very environment, sciences saw surprisingly. you reactive we in they're if of like equity product primarily with that that the in environments. the seen prior to down work look work innovation continue consulting side. from if XXXX, keeping far, at the impacted In aging demand to filings recessionary you fundamental our on now closures. continues as talent So, the environment. see reactive and population in actually driven areas have We macroeconomic what life that units. complex From period, we and are are standpoint our the both generally types And continue only pandemic seen to challenges. What clients, industry, These design standpoint bankrupt, really much their in sort work, products, was we've drivers, in or around economic back see selling those a the clients XXXX, for portion the that associated health market the if recessionary of we We that's continue the drivers have in which strong. and even side electronics

work utilities. risk by things is climate like Our extreme change and driven weather for

And continue so, those drivers to be there.

significant On the of portion proactive regulatory our side, that's a work.

products need Our clients those safety get their frameworks. still to through

those freezing increasing And less, those they're complexity. do or of their past but seen the outsource in We've in complexity, and those clients increasing some some so, are if outsource seen clients also end. slowing of are products in regulatory hiring more that on those frameworks we've

timeframe. chemical that And so, XXXX-XXXX regulatory throughout to for our example, grow continued business

immune by we're talent look, So, a well keeping side, on stretch. we're any the not eye And as as close side. that

at found, But on on we've Our particularly nature these of drivers based and we in some got the environments. and so clients we've our to what budgets, history work. look their types very got, market our of the immunity, speak, carefully

Our demand continues.

Tobey Sommer

question And looks history? weave quarter period, big this, in just had – I product Rich could what you perhaps versus risk the a – current into like describe, or

Richard Schlenker

have normal. And the vary of X%, in and would like getting range, might achieved that in in that long of that investors. level. for doesn't being had, they typically or gas we've get Bruno X% quarter, Exponent And PG&E, X% X%, accident the quarters, Gulf larger an as from very something step But sort larger might time, the with X% called large particular to that think future portfolio we Toyota term, we in about of the than line time at the our or As of revenues times, projects, out talked individual for is, from those BP accelerations Macondo that for for over let's and unintended be that San off. the sort might in a say, than we X% that project individual project normally,

portfolio it larger doing human that we've We've The talked that learning more we've is to the transition some individual around machine a participant some been diverse had clients. we that Still had past. were we've to number – able much very been business that is of But across larger more much projects – fortunate at a a or than good other time least studies were also in within clients. the size. in we where particular studies about concentration of that

upward is investigative. in as a around that lot work sensitivity some those around of and Pacific they that, management their And were a portfolio And major for move with really work fires area now, but support years sensitivity. maybe larger, our where was in and a to to forward that participants Gas where area that the doing that very learning our on & try area, an much of seeing there in what set three it studies. approach and strategy. investigations we when again, around the risk reactive that out of for we're talked the we've of would we're The might ago area clients, a across total normal a it's still of doing that about we're we are machine where area different X%, have is that But have might or So broad a be Electric nature very four portfolio an But diversified then, of XX% than projects. it of them built other we studies. an business initiated few the it, really we our more average, is than human good projects area

three or diversified client, a ago. portfolio large more again, years had, four yes, but than So, we

Operator

I'll back the session. does question-and-answer [Operator you. Instructions]. turn that the And over now conclude to conference

Richard Schlenker

very now earnings with thank our everybody call between And next the look appreciate up and Okay, and forward you call. much. catching on we being you to

Operator

And thank excellent you. We you Thank today's that conference. Have do does an day. for your conclude participation.

Exponent (EXPO) 29 Jul 222022 Q2 Earnings call transcript