Exponent Reports Fourth Quarter and Fiscal Year 2020 Financial Results

Rhea-AI Summary

Exponent, Inc. (Nasdaq: EXPO) reported Q4 and FY 2020 results, revealing a 6% decrease in total revenues to $103.2 million for the quarter and 4% decrease to $399.9 million for the fiscal year. Despite these declines, net income rose to $21.8 million ($0.41/share) in Q4, up from $19.1 million. EBITDA increased to $28.3 million from $27.7 million. For FY 2021, Exponent expects low-single digit revenue growth before reimbursements. The company maintains a strong cash position of $242.5 million and plans to increase its quarterly dividend from $0.19 to $0.20.

Positive

• Net income for Q4 increased to $21.8 million, or $0.41 per diluted share.
• Fourth quarter EBITDA rose to $28.3 million, up from $27.7 million year-over-year.
• Despite project delays, annual revenues from proactive services grew.
• Company held cash, cash equivalents, and short-term investments of $242.5 million at year-end.

Negative

• Total revenues decreased 6% in Q4 and 4% in FY 2020 compared to previous periods.
• EBITDA for FY 2020 decreased to $102.1 million from $107.1 million in FY 2019.
• Continued project delays due to COVID-19 impacting business operations.

MENLO PARK, Calif., Feb. 04, 2021 (GLOBE NEWSWIRE) -- Exponent, Inc. (Nasdaq:EXPO) today reported financial results for the fourth quarter and fiscal year 2020 ended January 1, 2021.

“In a year of worldwide challenge, we demonstrated the durability of Exponent’s business model and the strength of our market opportunities. Our fourth quarter results exceeded our prior expectations and illustrate continued improvement across the business. For the quarter, we expanded EBITDA¹ margin 200 basis points as compared to the same period last year. Net revenues in the quarter reflected a return to underlying growth, declining only 5% in the face of the 8% headwind from an extra week in the fourth quarter of 2019. Our successful execution demonstrates the resiliency of our business model, the dedication of our world-class team, and the strength of our reputation. While we are encouraged by our results, we continue to experience project delays in certain areas due to COVID-19,” commented Dr. Catherine Corrigan, President and Chief Executive Officer.

“Society is raising the bar for safety, health, sustainability and reliability, and clients are increasingly seeking Exponent’s interdisciplinary proactive solutions. Exponent grew its annual revenues from proactive services in both business segments, despite pandemic related restrictions, one less week than the prior year, and the divestiture of the German entity. Industry and government alike are advancing their missions in multifaceted ways, from designing novel products and navigating new regulatory challenges to innovating and evaluating new paradigms and processes. These dynamics are creating opportunities for Exponent, and we will leverage our nimble business model to capitalize on these opportunities to drive long-term growth and profitability,” continued Dr. Corrigan.

Fourth Quarter Financial Results

Total revenues for the 13-week fourth quarter of 2020 decreased 6% to $103.2 million, as compared to $110.1 million in the 14-week fourth quarter of 2019. Revenues before reimbursements decreased 5% to $97.3 million as compared to $102.2 million in the same period one year ago.

Net income increased to $21.8 million, or $0.41 per diluted share, in the fourth quarter of 2020, as compared to $19.1 million, or $0.36 per diluted share, in the same period of 2019. The tax benefit for the classification of tax adjustments associated with share-based awards realized in the fourth quarter of 2020 was $2.6 million as compared to $0.7 million in the same period last year. Inclusive of the tax benefit, Exponent’s consolidated tax rate was 18.6% in the fourth quarter, as compared to 28.7% for the same period in 2019.

EBITDA¹ increased to $28.3 million, as compared to $27.7 million in the fourth quarter of 2019.

Fiscal Year 2020 Financial Results

For the 52-week fiscal year 2020, total revenues decreased 4% to $399.9 million, as compared to $417.2 million in the 53-week fiscal year 2019. Revenues before reimbursements decreased 3% to $378.4 million, as compared to $391.4 million in the same period one year ago.

Net income was $82.6 million, or $1.55 per diluted share, as compared to $82.5 million, or $1.53 per diluted share, in fiscal 2019. The tax benefit for the classification of tax adjustments associated with share-based awards realized in fiscal 2020 was $12.3 million as compared to $8.1 million in the same period last year. Inclusive of the tax benefit, Exponent’s consolidated tax rate was 14.8% in fiscal 2020, as compared to 20.9% in the prior year period.

EBITDA¹ decreased to $102.1 million, as compared to $107.1 million in the prior year.

In fiscal 2020, Exponent distributed $39.8 million in dividends, repurchased $40.0 million in common stock and closed the period with $242.5 million in cash, cash equivalents and short-term investments.

In a separate press release today, Exponent announced an increase in its quarterly cash dividend from $0.19 to $0.20 to be distributed on March 26, 2021 and reiterated its intent to continue to pay quarterly dividends.

Business Overview

Exponent’s engineering and other scientific segment represented 81% of the Company’s net revenues in the fourth quarter and 80% for fiscal year 2020. Net revenues in this segment decreased 5% in the fourth quarter and 4% in fiscal year 2020, as compared to 2019. Clients continued to seek out Exponent’s expertise for proactive and reactive engagements across a broad range of industries and use cases. For example, our multidisciplinary battery team leveraged its experience in consumer electronics to advance energy storage for electric vehicles and medical devices. Our integrity management advisory services for the utilities industry remained strong as clients and regulators focus on power reliability and safety. Our biomedical team advised clients as they navigate evolving regulatory frameworks around the world. While we continue to experience delays in certain areas such as litigation support and human participant studies due to the pandemic, we are confident these will be long-term growth drivers for our business.

Exponent’s environmental and health segment represented 19% of the Company’s net revenues in the fourth quarter and 20% for fiscal year 2020. Net revenues in this segment decreased 5% in the fourth quarter and increased 1% in fiscal year 2020, as compared to 2019. This segment also experienced delays in litigation related projects. Within this segment, the chemical regulation and food safety practice continued to grow as Exponent’s scientists evaluated the effects of chemicals and new products on human health and the environment.

Exponent has been engaged by industry and government to help in the response to the coronavirus. We continue to advise clients with respect to disinfectant products and procedures, COVID-19 testing, contact tracing, and occupational health and safety. In the fourth quarter, we deployed wearable technology platforms for COVID-19 risk monitoring and mitigation for the U.S. Army and Navy. Beyond COVID-19 use cases, wearable technologies can be used to monitor worker health, safety and performance, and to evaluate the safety and efficacy of health care products and treatments. Exponent is uniquely positioned with its diverse and integrated expertise to advise clients as they leverage technology to improve human health and enhance human performance.

Business Outlook
For more than 50 years, Exponent has been called upon to advise clients on the causes of failures as well as how to produce safer, healthier, more sustainable and more reliable products and processes. Our market drivers are strong, and demand for our services has continued despite ongoing uncertainties and economic turbulence.   

“While we are seeing positive indicators in our underlying business, there remains a degree of uncertainty surrounding how and over what timeframe business and litigation activities will return to normal. As a reminder, pandemic-related restrictions had a limited impact on our results in the first quarter of 2020, and approximately 1% of revenues in the quarter were attributable to our German entity which was divested in April 2020. The combination of these factors will create a challenging year over year comparison for the first quarter of 2021. As a result, for the first quarter of 2021 we expect revenues before reimbursements to grow in the low-single digits and EBITDA¹ margin to be approximately flat, as compared to the same period in 2020. For the full year 2021, we expect revenues before reimbursements to grow in the high-single digits and EBITDA¹ margin to be flat to up 30 basis points, as compared to 2020,” commented Richard Schlenker, Executive Vice President and Chief Financial Officer.

“While uncertainties related to the pandemic remain ahead of us, society will continue to raise the bar for safety, health, sustainability and reliability, and clients will continue to seek Exponent’s interdisciplinary solutions. We remain focused on developing and retaining our exceptional talent, ensuring that we are ahead of the curve and increasing our value in the marketplace by solving our clients’ most pressing problems. I am grateful to our team for their hard work, dedication, and resiliency throughout this challenging period. We are well positioned for long-term growth and will continue to deliver for all of our stakeholders,” concluded Dr. Corrigan.

Today's Conference Call Information

Exponent will discuss its financial results in more detail on a conference call today, Thursday, February 4, 2021, starting at 4:30 p.m. Eastern Time / 1:30 p.m. Pacific Time. The audio of the conference call is available by dialing (800) 289-0438 or (323) 794-2423. 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 (888) 203-1112 or (719) 457-0820 and entering passcode 3115187#.

Footnotes

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. A reconciliation of the measures to GAAP is set forth below.

About Exponent

Exponent is an engineering and scientific consulting firm providing solutions to complex problems. Exponent's interdisciplinary organization of scientists, physicians, engineers, and business consultants draws from more than 90 technical disciplines to solve the most pressing and complicated challenges facing stakeholders today. The firm leverages over 50 years of experience in analyzing accidents and failures to advise clients as they innovate their technologically complex products and processes, ensure the safety and health of their users, and address the challenges of sustainability.

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 general 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 10K 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 January 1, 2021 and January 3, 2020
(unaudited)
(in thousands, except per share data)
							Quarters Ended						Years Ended
							January 1,			January 3,			January 1,			January 3,
								2021			2020			2021			2020
							(13 weeks)			(14 weeks)			(52 weeks)			(53 weeks)
Revenues
	Revenues before reimbursements						$	97,330		$	102,220		$	378,412		$	391,390
	Reimbursements							5,909			7,894			21,488			25,809
		Revenues						103,239			110,114			399,900			417,199
Operating expenses
	Compensation and related expenses							69,500			66,581			250,041			252,197
	Other operating expenses							8,498			9,114			32,234			33,562
	Reimbursable expenses							5,909			7,894			21,488			25,809
	General and administrative expenses							1,598			5,175			12,888			20,520
		Total operating expenses						85,505			88,764			316,651			332,088
		Operating income						17,734			21,350			83,249			85,111
Other income (expense), net
	Interest income, net							209			1,018			1,705			3,912
	Miscellaneous income, net							8,886			4,438			11,982			15,167
		Total other income (expense), net						9,095			5,456			13,687			19,079
		Income before income taxes						26,829			26,806			96,936			104,190
Income taxes								4,989			7,685			14,384			21,730
		Net income					$	21,840		$	19,121		$	82,552		$	82,460
Net income per share:
	Basic						$	0.42		$	0.36		$	1.58		$	1.56
	Diluted						$	0.41		$	0.36		$	1.55		$	1.53
Shares used in per share computations:
	Basic							52,402			52,681			52,388			52,691
	Diluted							53,260			53,817			53,323			53,884

EXPONENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
January 1, 2021 and January 3, 2020
(unaudited)
(in thousands)
							January 1,				January 3,
								2021				2020
Assets
Current assets:
	Cash and cash equivalents						$	197,525			$	176,436
	Short-term investments							45,001				55,165
	Accounts receivable, net							111,565				120,138
	Prepaid expenses and other assets							12,741				12,305
		Total current assets						366,832				364,044
Property, equipment and leasehold improvements, net								59,823				61,587
Operating lease right-of-use asset								19,322				23,003
Goodwill								8,607				8,607
Other assets								125,512				106,170
		Total Assets					$	580,096			$	563,411
Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable and accrued liabilities						$	16,327			$	18,583
	Accrued payroll and employee benefits							83,194				86,723
	Deferred revenues							11,800				12,710
	Operating lease liability							5,987				5,944
		Total current liabilities						117,308				123,960
Other liabilities								86,947				71,042
Operating lease liability								14,343				18,158
		Total liabilities						218,598				213,160
Stockholders' equity:
	Common stock							66				66
	Additional paid-in capital							265,328				244,935
	Accumulated other comprehensive loss							(1,932	)			(1,760	)
	Retained earnings							421,809				384,668
	Treasury stock, at cost							(323,773	)			(277,658	)
		Total stockholders' equity						361,498				350,251
							$	580,096			$	563,411

EXPONENT, INC.
EBITDA and EBITDAS (1)
For the Quarters Ended January 1, 2021 and January 3, 2020
(unaudited)
(in thousands)
							Quarter Ended								Years Ended
							January 1,				January 3,				January 1,				January 3,
								2021				2020				2021				2020
							(13 weeks)				(14 weeks)				(52 weeks)				(53 weeks)
Net Income							$	21,840			$	19,121			$	82,552			$	82,460
Add back (subtract):
	Income taxes							4,989				7,685				14,384				21,730
	Interest income, net							(209	)			(1,018	)			(1,705	)			(3,912	)
	Depreciation and amortization							1,695				1,902				6,871				6,806
		EBITDA (1)						28,315				27,690				102,102				107,084
	Stock-based compensation							3,952				3,881				17,278				17,466
		EBITDAS (1)					$	32,267			$	31,571			$	119,380			$	124,550
(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 Q4 2020 earnings results?

Exponent's Q4 2020 net income increased to $21.8 million, or $0.41 per diluted share, despite a 6% revenue decline.

What is Exponent's revenue outlook for FY 2021?

Exponent expects revenues before reimbursements to grow in the low-single digits for Q1 2021 and in the high-single digits for FY 2021.

What challenges did Exponent face in FY 2020?

Exponent faced project delays due to COVID-19 and a 4% decline in total revenues year-over-year.

How much cash does Exponent have?

Exponent reported a strong cash position of $242.5 million at the end of FY 2020.