Exponent Reports First Quarter 2024 Financial Results

Rhea-AI Summary

Exponent, Inc. (Nasdaq: EXPO) reported strong financial results for the first quarter of fiscal year 2024, with total revenues increasing to $144.9 million, net income rising to $30.1 million, and EBITDA reaching $40.1 million. The company also announced a quarterly cash dividend of $0.28 per share. Dr. Catherine Corrigan, President and CEO, highlighted the growth in revenues and earnings per share, driven by the company's diverse portfolio and premium service offerings across various industries. Exponent's expertise in failure analysis and regulatory consulting continues to attract clients globally, positioning the company for future growth amidst increasing safety and innovation demands.

Positive

• Total revenues for the first quarter of 2024 increased to $144.9 million.
• Net income rose to $30.1 million, with earnings per share of $0.59.
• EBITDA reached $40.1 million, representing 29.2% of net revenues.
• Exponent announced a quarterly cash dividend of $0.28 per share.
• Revenues before reimbursements grew by 6.6% to $137.2 million.
• Dr. Catherine Corrigan emphasized the company's strong performance and positioning in the market.
• The company's engineering segment saw an 8% increase in revenues driven by reactive services demand.
• Exponent anticipates revenue growth in the low-single digits for the second quarter and fiscal year 2024.
• The company continues to focus on aligning resources with market demand for sustainable growth.

Negative

• None.

Insights

Financial Analyst

Exponent Inc.'s strong performance in the first quarter is a reflection of the strength in its diversified services and its niche in failure analysis and regulatory consulting. The company's revenue growth of 7% and an EBITDA margin of 29.2% are robust indicators, especially when viewed against industry standards where high single-digit revenue growth is generally seen as healthy for professional services firms. This revenue growth coupled with an increase in EBITDA suggests operational efficiency and cost management that investors should consider when assessing the company's profitability trajectory. The 8% increase in revenue for the engineering and scientific segment specifically indicates a strong demand for Exponent's expertise in reactive services, which is notable given the unpredictability in this income stream.

Market Analyst

The report highlights an increased global focus on safety, health and environmental concerns, accelerating demand for Exponent's services. The mention of robust failure analysis and regulatory consulting across industries such as energy, vehicles and medical devices, reflects broader market trends where companies increasingly seek to mitigate risks associated with innovation and complex regulations. This positions Exponent well for future opportunities, particularly as society's expectations around product safety and environmental impact continue to rise. Furthermore, the announcement of a steady quarterly dividend and a healthy cash position provides a signal of financial stability that might appeal to investors who value consistent returns amid market uncertainties.

Tax Analyst

Exponent's increased consolidated tax rate from 18.0% to 25.4% is a significant uptick, which could be indicative of lower benefits from share-based award classifications or other tax-planning strategies. This rise in tax rate despite an increase in net income suggests a changing tax landscape or internal financial maneuvers that investors should monitor. Nevertheless, the positive net income growth and the proactive business strategy in sectors other than consumer electronics, which are more susceptible to cyclical impacts, may offset concerns related to higher tax rates in the eyes of long-term investors. It is essential to consider the implications of such tax rate changes when forecasting future earnings and valuations.

MENLO PARK, Calif., April 25, 2024 (GLOBE NEWSWIRE) -- Exponent, Inc. (Nasdaq: EXPO) today reported financial results for the first quarter of fiscal year 2024 ended March 29, 2024.

“Exponent delivered better than expected results in the first quarter, as we grew revenues before reimbursements 7% and expanded earnings per share year over year. This is a testament to our highly diversified portfolio and the merits of our premium service offerings to multiple industries,” commented Dr. Catherine Corrigan, President and Chief Executive Officer. “We continued to deepen our roots in reactive work, which grew in the mid-teens, driven by robust failure analysis and dispute-related work across a wide spectrum of industries. From wind farms to life saving medical devices, clients around the world increasingly rely on Exponent’s unrivaled failure analysis expertise to provide critical, real-time insights on regulatory and safety related decisions.

“Exponent’s team of experts continues to advise clients on critical needs throughout the product lifecycle. Our proactive business, excluding consumer electronics which continues to experience cyclical impacts, increased year over year driven by strength in the transportation, utilities and chemical sectors.

“The increasing global attention on safety, health, and environmental concerns coupled with the complexity and pace of innovation continues to drive greater demand for our expertise,” continued Dr. Corrigan. “Exponent remains well positioned to serve our clients and deliver mission-critical insights for the present while paving the way for future innovations.”

First Quarter Financial Results

Total revenues and revenues before reimbursements for the first quarter of 2024 increased 3.3% to $144.9 million and 6.6% to $137.2 million, respectively, as compared to $140.3 million and $128.7 million in the first quarter of 2023, respectively.

Net income increased to $30.1 million, or $0.59 per diluted share, in the first quarter of 2024, as compared to $29.1 million, or $0.56 per diluted share, in the same period of 2023. The tax benefit for the classification of tax adjustments associated with share-based awards realized in the first quarter of 2024 was $0.9 million, or $0.02 per diluted share, as compared to $3.6 million, or $0.07, in the first quarter of 2023. Including the tax benefit, Exponent’s consolidated tax rate was 25.4% in the first quarter of 2024, as compared to 18.0% for the same period in 2023.

EBITDA¹ increased to $40.1 million, or 29.2% of net revenues, in the first quarter of 2024, as compared to $35.8 million, or 27.8% of net revenues in the first quarter of 2023.

In a separate press release today, Exponent announced its quarterly cash dividend of $0.28 to be paid on June 21, 2024, and reiterated its intent to continue to pay quarterly dividends. During the first quarter of 2024, Exponent paid $15.6 million in dividends and closed the period with $168.7 million in cash and cash equivalents. 

Business Overview

Exponent’s engineering and other scientific segment represented 84% of the Company’s revenues before reimbursements in the first quarter of 2024. What started as a slow quarter in January transitioned to a surge in demand for reactive services as the quarter progressed, driving a better-than-expected 8% increase in revenues before reimbursements in this segment. The uptick during the quarter was driven by dispute and recall-related work across the energy, vehicle, and medical device sectors.

Exponent’s environmental and health segment represented 16% of the Company’s revenues before reimbursements in the first quarter. Revenues before reimbursements in this segment increased 1% in the first quarter, compared to the same period in the prior year. Work in this segment was primarily driven by Exponent’s regulatory consulting in the chemical industry.

Business Outlook

“Strong business activity for our reactive service offerings and our successful efforts to align resources with demand resulted in 75% utilization in the quarter and a significant increase in EBITDA margin. We will continue to strategically manage headcount and balance utilization based on market demand to position Exponent for long-term success,” commented Richard Schlenker, Executive Vice President and Chief Financial Officer.

For the second quarter of 2024, as compared to the same period one year prior, Exponent anticipates:

• Revenues before reimbursements to be flat to up in the low-single digits; and,
• EBITDA¹ to be 27.25% to 28.25% of revenues before reimbursements.

For the fiscal year 2024 we are increasing our revenue and margin guidance. Exponent anticipates:

• Revenues before reimbursements to grow in the low-single digits; and,
• EBITDA¹ to be 26.25% to 27.0% of revenues before reimbursements.

“Our core market dynamics and enduring value proposition stand firm. In an era where innovation leads to continuous disruption and safety expectations constantly evolve, the ramifications of missteps only intensify, heightening the significance of our insights. Through strategic measures to align our resources with demand, we continue to fortify our competitive advantage and are primed to drive sustainable, long-term growth,” concluded Dr. Corrigan.

Today's Conference Call Information

Exponent will discuss its financial results in more detail on a conference call today, Thursday, April 25, 2024, starting at 4:30 p.m. Eastern Time / 1:30 p.m. Pacific Time. The audio of the conference call is available by dialing (844) 481-2781 or (412) 317-0672. A live webcast of the call will be available on the Investor Relations section of the Company's website at www.exponent.com/investors. For those unable to listen to the live webcast, a replay of the call will also be available on the Exponent website, or by dialing (877) 344-7529 or (412) 317-0088 and entering passcode 9671556#.

Use of non-GAAP Financial Measures ¹

EBITDA is a non-GAAP financial measure defined by the Company as net income before income taxes, interest income, depreciation, and amortization. EBITDAS is a non-GAAP financial measure defined by the Company as EBITDA before stock-based compensation. The Company regards EBITDA and EBITDAS as useful measures of operating performance and cash flow to complement operating income, net income, and other GAAP financial performance measures. Additionally, management believes that EBITDA and EBITDAS provide meaningful comparisons of past, present, and future operating results. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. These measures, however, should be considered in addition to, and not as a substitute or superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP.

Exponent has provided its outlook regarding EBITDA as a percentage of revenues before reimbursements. The Company has not reconciled this non-GAAP financial measure to the corresponding GAAP financial measure because guidance for the various reconciling items is not provided and the Company is unable to estimate with reasonable certainty the effect of these items without unreasonable effort. For example, the Company is unable to estimate with reasonable certainty the impact of equity awards on Exponent’s taxes without unreasonable effort. These items are uncertain, depend on various factors, and may have a material effect on Exponent’s results computed in accordance with GAAP. A reconciliation between the historical GAAP and non-GAAP financial measures presented in this release is provided in the financial tables at the end of this release.

About Exponent

Exponent brings together 90+ technical disciplines and 950+ consultants to help our clients navigate the increasing complexity of more than a dozen industries, connecting decades of pioneering work in failure analysis to develop solutions for a safer, healthier, more sustainable world.

Exponent's consultants deliver the highest value by leveraging multidisciplinary expertise and resources from across Exponent's offices in North America, Asia, and Europe. Exponent's consultants, laboratories, databases, and computing resources work seamlessly together around the globe, enabling us to produce the breakthrough insights needed to help multinational companies, startups, law firms, insurance companies, governments, and society respond to incidents and push their products and processes forward.

Exponent may be reached at (888) 656­-EXPO, info@exponent.com, or www.exponent.com. 

Forward Looking Statements

This news release contains, and incorporates by reference, certain “forward-looking” statements (as such term is defined in the Private Securities Litigation Reform Act of 1995, and the rules promulgated pursuant to the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended) that are based on the beliefs of the Company’s management, as well as assumptions made by and information currently available to the Company’s management. When used in this document and in the documents incorporated herein by reference, the words “intend,” “anticipate,” “believe,” “estimate,” “expect” and similar expressions, as they relate to the Company or its management, identify such forward-looking statements. Such statements reflect the current views of the Company or its management with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the Company’s actual results, performance, or achievements could differ materially from those expressed in, or implied by, any such forward-looking statements. Factors that could cause or contribute to such material differences include the possibility that the demand for our services may decline as a result of changes in generally applicable and industry-specific economic conditions, the timing of engagements for our services, the effects of competitive services and pricing, the absence of backlog related to our business, our ability to attract and retain key employees, the effect of tort reform and government regulation on our business, and liabilities resulting from claims made against us. Additional risks and uncertainties are discussed in our Annual Report on Form 10-K under the heading “Risk Factors” and elsewhere in the report. The inclusion of such forward-looking information should not be regarded as a representation by the Company or any other person that the future events, plans, or expectations contemplated by the Company will be achieved. The Company undertakes no obligation to release publicly any updates or revisions to any such forward-looking statements.

Source: Exponent, Inc.

EXPONENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Quarters Ended March 29, 2024 and March 31, 2023
(unaudited)
(in thousands, except per share data)
				Quarters Ended
				March 29,			March 31,
				2024			2023
Revenues
	Revenues before reimbursements			$	137,207		$	128,705
	Reimbursements				7,726			11,604
		Revenues			144,933			140,309
Operating expenses
	Compensation and related expenses				90,327			84,181
	Other operating expenses				10,531			9,561
	Reimbursable expenses				7,726			11,604
	General and administrative expenses				5,636			5,843
		Total operating expenses			114,220			111,189
		Operating income			30,713			29,120
Other income
	Interest income, net				2,626			1,770
	Miscellaneous income, net				7,084			4,648
					9,710			6,418
		Income before income taxes			40,423			35,538
Income taxes					10,281			6,414
		Net income		$	30,142		$	29,124
Net income per share:
	Basic			$	0.59		$	0.57
	Diluted			$	0.59		$	0.56
Shares used in per share computations:
	Basic				51,006			51,132
	Diluted				51,419			51,682

EXPONENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 29, 2024 and December 29, 2023
(unaudited)
(in thousands)
				March 29,				December 29,
					2024				2023
Assets
Current assets:
	Cash and cash equivalents			$	168,665			$	187,150
	Accounts receivable, net				162,885				167,360
	Prepaid expenses and other assets				20,773				25,022
		Total current assets			352,323				379,532
Property, equipment and leasehold improvements, net					74,503				75,318
Operating lease right-of-use asset					24,145				24,600
Goodwill					8,607				8,607
Other assets					169,827				158,720
		Total assets		$	629,405			$	646,777
Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable and accrued liabilities			$	23,926			$	22,125
	Accrued payroll and employee benefits				68,285				111,773
	Deferred revenues				16,106				21,709
	Operating lease liability				5,814				6,302
		Total current liabilities			114,131				161,909
Other liabilities					119,585				106,824
Operating lease liability					21,378				21,959
		Total liabilities			255,094				290,692
Stockholders' equity:
	Common stock				66				66
	Additional paid-in capital				335,014				321,448
	Accumulated other comprehensive loss				(3,187	)			(2,977	)
	Retained earnings				588,570				574,082
	Treasury stock, at cost				(546,152	)			(536,534	)
		Total stockholders' equity			374,311				356,085
		Total liabilities & stockholders' equity		$	629,405			$	646,777

EXPONENT, INC.
EBITDA and EBITDAS (1)
For the Quarters Ended March 29, 2024 and March 31, 2023
(unaudited)
(in thousands)
			Quarters Ended
			March 29,				March 31,
				2024				2023
Net Income			$	30,142			$	29,124
Add back (subtract):
	Income taxes			10,281				6,414
	Interest income, net			(2,626	)			(1,770	)
	Depreciation and amortization			2,324				1,988
		EBITDA (1)		40,121				35,756
	Stock-based compensation			7,340				7,063
		EBITDAS (1)	$	47,461			$	42,819
(1) EBITDA is a non-GAAP financial measure defined by the Company as net income before income taxes, interest income, depreciation and amortization. EBITDAS is a non-GAAP financial measure defined by the Company as EBITDA before stock-based compensation. The Company regards EBITDA and EBITDAS as useful measures of operating performance and cash flow to complement operating income, net income and other GAAP financial performance measures. Additionally, management believes that EBITDA and EBITDAS provide meaningful comparisons of past, present and future operating results. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. These measures, however, should be considered in addition to, and not as a substitute or superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP.

FAQ

What were Exponent's total revenues for the first quarter of 2024?

Exponent's total revenues for the first quarter of 2024 increased to $144.9 million.

How much was Exponent's net income in the first quarter of 2024?

Exponent's net income rose to $30.1 million in the first quarter of 2024.

What was Exponent's EBITDA in the first quarter of 2024?

Exponent's EBITDA reached $40.1 million in the first quarter of 2024, representing 29.2% of net revenues.

Did Exponent announce any dividends in the first quarter of 2024?

Yes, Exponent announced a quarterly cash dividend of $0.28 per share.

Which segment of Exponent's business saw an increase in revenues driven by reactive services demand?

Exponent's engineering segment saw an 8% increase in revenues driven by reactive services demand.

What revenue growth is Exponent anticipating for the second quarter of 2024?

Exponent anticipates flat to up in the low-single digits revenue growth for the second quarter of 2024.

How is Exponent focusing on sustainable growth?

Exponent continues to strategically manage headcount and balance utilization based on market demand to position the company for long-term success.