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Exponent Reports Fourth Quarter and Fiscal Year 2023 Financial Results

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Exponent, Inc. (Nasdaq: EXPO) reported a 7% increase in net revenues in 2023, with a 3.5% decrease in total revenues in the fourth quarter of 2023. The company's financial results for fiscal year 2023 showed a 4.6% increase in total revenues. Exponent also announced an increase in its quarterly cash dividend and an increase in its stock repurchase program. The business outlook for 2024 anticipates flat to down revenues before reimbursements and a decrease in EBITDA1.
Positive
  • 7% increase in net revenues in 2023
  • Increase in quarterly cash dividend and stock repurchase program
  • Growth in the engineering and other scientific segment
Negative
  • 3.5% decrease in total revenues in the fourth quarter of 2023
  • Flat to down revenues before reimbursements anticipated for 2024
  • Decrease in EBITDA1 for 2024

Insights

The reported decrease in net income and diluted earnings per share (EPS) from Exponent, Inc. for Q4 2023, alongside a slight increase in revenues before reimbursements, indicates a contraction in profitability. This contraction could be attributed to the increased consolidated tax rate from 26.2% to 30.4%, which is a significant jump and impacts the bottom line. The reduction in net income despite revenue growth suggests operational inefficiencies or increased costs that investors should monitor.

Furthermore, the company's EBITDA margin slightly decreased, which could raise concerns about cost management and profitability trends. However, the increase in the quarterly cash dividend and the expansion of the stock repurchase program signal management's confidence in the company's financial health and commitment to returning value to shareholders. These actions can often be viewed positively in the market, potentially offsetting concerns about the decreased profitability in the short term.

Exponent's performance in the engineering and scientific segment, which is the company's primary revenue driver, reflects a positive trajectory with an 8% increase in annual revenues. This growth, particularly in transportation and energy sectors, suggests robust demand for Exponent's services in these industries. The environmental and health segment's revenue decrease in Q4 due to client budget constraints could be a signal of broader economic pressures that may affect future business performance.

Despite the company's proactive approach to addressing industry headwinds, such as the decline in the consumer electronics sector, the guidance for 2024 indicates potential stagnation or a modest decline in revenues. This cautious outlook, likely influenced by macroeconomic uncertainty, could temper investor expectations for growth and may require strategic adjustments to maintain profitability.

The macroeconomic uncertainty referenced by Exponent's CFO could be indicative of broader economic trends affecting the business environment. Factors such as inflation, supply chain disruptions, or shifts in regulatory landscapes can lead to constrained budgets and project delays, directly impacting companies like Exponent that rely on corporate and legal sector engagements.

The company's strategic focus on new business development and cost alignment suggests a proactive response to these economic challenges. The ability to adapt to changing market conditions is vital for long-term success and Exponent's emphasis on innovation and talent development positions it to capitalize on future market opportunities when economic conditions stabilize.

MENLO PARK, Calif., Feb. 01, 2024 (GLOBE NEWSWIRE) -- Exponent, Inc. (Nasdaq: EXPO) today reported financial results for the fourth quarter and fiscal year 2023 ended December 29, 2023.

“Exponent’s world class team of experts delivered a 7% increase in net revenues in 2023, advising clients across industries with a highly diversified portfolio of services. Notably, our reactive business grew in the high-teens year over year, driven by robust failure investigations and dispute-related work. Exponent’s leadership in high-profile failure analysis, from wildfire events to advanced transportation and more, has continued to expand as we further differentiate our experience in this portion of the business,” commented Dr. Catherine Corrigan, President and Chief Executive Officer.

“As reactive work expanded, our team also continued to address clients’ critical needs throughout the product lifecycle. While proactive revenues for the consumer electronics sector declined due to ongoing industry headwinds and product lifecycle timing, the remainder of our proactive portfolio grew in the mid-single digits for the full year.”

“Looking ahead, we expect 2024 demand for our reactive services to remain on pace with 2023 levels as a result of the high hurdle rate for year-over-year comparisons. Constrained budgets and project delays stemming from ongoing macroeconomic uncertainty are impacting litigation as well as proactive work, and we will continue to face headwinds in the consumer electronics sector,” continued Dr. Corrigan. “In this dynamic environment, we remain keenly focused on new business development and strategic investments in growth opportunities, as well as aligning our resources and costs with anticipated demand. We will continue to position Exponent on the cutting edge of innovation supported by our world class team and differentiated capabilities, and remain confident in our ability to deliver long-term profitable growth and value for our shareholders.”

Fourth Quarter Financial Results

Total revenues decreased 3.5% to $122.9 million in the fourth quarter of 2023, as compared to $127.4 million in the fourth quarter of 2022. Revenues before reimbursements increased 1.1% to $113.9 million, as compared to $112.6 million in the fourth quarter of 2022.

Net income decreased to $20.9 million, or $0.41 per diluted share, in the fourth quarter of 2023, as compared to $22.5 million, or $0.44 per diluted share, in the same period of 2022. Exponent's consolidated tax rate was 30.4% in the fourth quarter, as compared to 26.2% for the same period in 2022.

EBITDA1 decreased to $30.5 million, or 26.8% of revenues before reimbursements, in the fourth quarter of 2023, as compared to $31.1 million, or 27.6% of revenues before reimbursements in the fourth quarter of 2022.

Fiscal Year 2023 Financial Results

Total revenues increased 4.6% to $536.8 million for fiscal year 2023, as compared to $513.3 million in fiscal year 2022. Revenues before reimbursements increased 7.2% to $497.2 million, as compared to $463.8 million in fiscal year 2022.

Net income was $100.3 million, or $1.94 per diluted share, during fiscal year 2023, as compared to $102.3 million, or $1.96 per diluted share, in fiscal year 2022. The tax benefit for the classification of tax adjustments associated with share-based awards realized during fiscal year 2023 was $3.6 million or $0.07 per diluted share, as compared to $5.8 million or $0.11 per diluted share during fiscal year 2022. Inclusive of the tax benefit, Exponent’s consolidated tax rate was 26.2% in fiscal year 2023, as compared to 22.6% in fiscal year 2022.

EBITDA1 increased to $137.7 million, or 27.7% of revenues before reimbursements, in fiscal year 2023, as compared to $137.2 million, or 29.6% of revenues before reimbursements, in fiscal year 2022.

In a separate press release today, Exponent announced an increase in its quarterly cash dividend from $0.26 to $0.28 to be paid on March 22, 2024 and reiterated its intent to continue to pay quarterly dividends. Additionally, our Board of Directors approved an increase in our current stock repurchase program bringing our total authorization to $100 million.  

During fiscal year 2023, Exponent paid $54.0 million in dividends, repurchased $24.2 million of common stock, and closed the period with $187.2 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 fourth quarter of 2023 and 83% of revenues before reimbursements in fiscal year 2023. Revenues before reimbursements in this segment increased 2% in the fourth quarter and increased 8% during fiscal year 2023 as compared to the prior year period. Growth during the quarter and full year was driven by demand for Exponent’s services across the transportation and energy sectors.

Exponent’s environmental and health segment represented 16% of the Company’s revenues before reimbursements in the fourth quarter and 17% of revenues before reimbursements in fiscal year 2023. Revenues before reimbursements in this segment decreased 3% for the fourth quarter and increased 5% during the full year 2023, compared to the same period in the prior year. Fourth quarter revenue in this segment was impacted by client budget constraints which resulted in delays in litigation work. Growth in this segment for the year was primarily driven by Exponent’s safety-related work evaluating the impacts of chemicals on human health and the environment.

Business Outlook

“With a challenging comparison in our reactive business, as well as ongoing headwinds in the consumer electronics industry and macro-related uncertainty, we expect revenue before reimbursements to be flat to down modestly in 2024,” commented Richard Schlenker, Executive Vice President and Chief Financial Officer. “Our confidence in the long-term growth trajectory of the business is unwavering, underscored by our Board of Directors’ recent approval of an increase in the Company’s quarterly dividend and increase to our share repurchase authorization.”

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

  • Revenues before reimbursements to be flat to down in the low-single digits; and,
  • EBITDA1 to be 26.0% to 27.0% of revenues before reimbursements.

For fiscal year 2024 as compared to fiscal year 2023, Exponent anticipates:

  • Revenues before reimbursements to be flat to down in the low-single digits; and,
  • EBITDA1 to be 25.75% to 26.5% of revenues before reimbursements.

“While our fourth quarter results and 2024 guidance reflect the realities and uncertainties of today’s marketplace, our fundamental market drivers and long-term value proposition remain strong. As innovation drives complexity and safety expectations to new heights, the consequences of failure will continue to escalate and our breakthrough insights will illuminate the path forward. The actions we are taking to expand our competitive moat and develop our exceptional talent position us to deliver long-term organic revenue growth, improve utilization and expand margins,” concluded Dr. Corrigan.

Today's Conference Call Information

Exponent will discuss its financial results in more detail on a conference call today, Thursday, February 1, 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 4567550.

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 December 29, 2023 and December 30, 2022
(unaudited)
(in thousands, except per share data)
          
       Quarters Ended Years Ended
       December 29,  December 30,  December 29, December 30,
       2023 2022 2023  2022 
              
Revenues           
 Revenues before reimbursements $113,872 $112,589 $497,189 $463,820 
 Reimbursements    9,028  14,766  39,577  49,473 
              
  Revenues    122,900  127,355  536,766  513,293 
              
Operating expenses          
 Compensation and related expenses  78,858  74,253  319,886  264,235 
 Other operating expenses   10,678  9,341  41,541  35,083 
 Reimbursable expenses   9,028  14,766  39,577  49,473 
 General and administrative expenses  5,942  6,960  24,440  23,660 
              
  Total operating expenses  104,506  105,320  425,444  372,451 
              
  Operating income   18,394  22,035  111,322  140,842 
              
Other income (expense), net          
 Interest income, net   1,929  1,262  7,150  2,096 
 Miscellaneous income, net   9,765  7,222  17,424  (10,704)
  Total other income (expense), net  11,694  8,484  24,574  (8,608)
              
  Income before income taxes  30,088  30,519  135,896  132,234 
              
Income taxes     9,159  7,995  35,557  29,904 
              
              
  Net income   $20,929 $22,524 $100,339 $102,330 
              
              
Net income per share:         
 Basic    $0.41 $0.44 $1.96 $1.98 
 Diluted    $0.41 $0.44 $1.94 $1.96 
              
Shares used in per share computations:        
 Basic     51,017  51,105  51,152  51,727 
 Diluted     51,446  51,649  51,635  52,280 
              


EXPONENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 29, 2023 and December 30, 2022
(unaudited)
(in thousands)
       
       
    December 29, December 30,
     2023   2022 
Assets     
Current assets:    
 Cash and cash equivalents$187,150  $161,458 
 Accounts receivable, net 167,360   170,114 
 Prepaid expenses and other assets 25,022   17,585 
  Total current assets 379,532   349,157 
Property, equipment and leasehold improvements, net 75,318   65,539 
Operating lease right-of-use asset 24,600   18,007 
Goodwill  8,607   8,607 
Other assets  158,720   145,352 
  Total Assets$646,777  $586,662 
       
Liabilities and Stockholders' Equity   
Current liabilities:   
 Accounts payable and accrued liabilities$22,125  $29,115 
 Accrued payroll and employee benefits 111,773   105,822 
 Deferred revenues 21,709   18,834 
 Operating lease liability 6,302   5,258 
  Total current liabilities 161,909   159,029 
Other liabilities  106,824   93,538 
Operating lease liability 21,959   13,343 
  Total liabilities 290,692   265,910 
       
Stockholders' equity:   
 Common stock 66   66 
 Additional paid-in capital 321,448   301,002 
 Accumulated other comprehensive loss (2,977)  (3,587)
 Retained earnings 574,082   528,810 
 Treasury stock, at cost (536,534)  (505,539)
  Total stockholders' equity 356,085   320,752 
    $646,777  $586,662 
       


EXPONENT, INC.
EBITDA and EBITDAS (1)
For the Quarters Ended December 29, 2023 and December 30, 2022
(unaudited)
(in thousands)
       
    Quarter Ended Years Ended
    December 29, December 30, December 29, December 30,
     2023   2022   2023   2022 
           
Net Income $20,929  $22,524  $100,339  $102,330 
           
Add back (subtract):       
           
 Income taxes 9,159   7,995   35,557   29,904 
 Interest income, net (1,929)  (1,262)  (7,150)  (2,096)
 Depreciation and amortization 2,381   1,855   8,916   7,079 
           
  EBITDA (1) 30,540   31,112   137,662   137,217 
           
 Stock-based compensation 3,180   4,292   20,357   20,364 
           
  EBITDAS (1)$33,720  $35,404  $158,019  $157,581 
           
           
           
(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 was the increase in net revenues for Exponent in 2023?

Exponent reported a 7% increase in net revenues in 2023.

What was the total revenue decrease in the fourth quarter of 2023?

Total revenues decreased 3.5% to $122.9 million in the fourth quarter of 2023.

What was the increase in total revenues for fiscal year 2023?

Total revenues increased 4.6% to $536.8 million for fiscal year 2023.

What was the increase in the quarterly cash dividend for Exponent?

Exponent announced an increase in its quarterly cash dividend from $0.26 to $0.28.

What is the stock repurchase program for Exponent?

The Board of Directors approved an increase in Exponent's stock repurchase program bringing the total authorization to $100 million.

What is the business outlook for 2024 for Exponent?

The business outlook for 2024 anticipates flat to down revenues before reimbursements and a decrease in EBITDA1.

Exponent Inc

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