Exponent, Inc. (Nasdaq:EXPO) today reported financial results for
the second quarter of fiscal year 2020 ended July 3, 2020.
“We are pleased with the responsiveness of our employees and the
adaptiveness of our company to today’s uncertain environment.
Clients continue to call upon Exponent to address their challenges
and to evaluate their opportunities, despite the rapid change and
unpredictability that the pandemic has infused into their operating
plans. While net revenues declined 12% in the second quarter, the
fundamentals of our business remain strong and we continue to
operate in a position of financial strength. We ended the quarter
with $190 million in cash, cash equivalents and short-term
investments, no debt, and reiterated our intent to continue
quarterly dividends,” commented Dr. Catherine Corrigan, President
and Chief Executive Officer.
“The demand for Exponent’s interdisciplinary solutions is
durable as companies continue to innovate and deploy increasingly
complex products and systems. At the same time, society’s focus on
safety, health, sustainability, and reliability requires rigorous
science and data-driven analysis, which are hallmarks of Exponent’s
more than 50 years of service. Our agility in assembling and
deploying diversely skilled teams – drawing upon more than eight
hundred highly credentialed consultants across a vast array of
disciplines – has manifested itself yet again as we advise clients
on a variety of issues prompted by COVID-19. Exponent has a long
history and strong track record of delivering for all of our
stakeholders, and we are confident in the resilience of our
business and our ability to deliver growth over the long term,”
continued Dr. Corrigan.
Second Quarter Financial Results
For the second quarter of 2020, total revenues were $92.0
million, down 14% as compared to $106.5 million in the same period
a year ago. Revenues before reimbursements, or net revenues,
were $87.9 million, down 12% as compared to $100.3 million in the
second quarter of 2019.
Net income for the second quarter of 2020 was $16.3 million or
$0.31 per diluted share as compared to $21.0 million or $0.39 per
diluted share in the same period of 2019. The tax benefit for
the classification of tax adjustments associated with share-based
awards was $0.9 million in the second quarter of 2020 and $0 in
same period last year. Inclusive of the tax benefit,
Exponent’s consolidated tax rate was 23.7% in the second quarter,
as compared to 27.2% for the same period in 2019.
EBITDA1 decreased to $22.8 million, or 26.0% of net revenue, as
compared to $29.6 million or 29.5%, in the second quarter of
2019.
Year to Date Financial Results
For the first half of 2020, total revenues decreased 4% to
$198.0 million as compared to $205.5 million in the same period of
2019. Revenues before reimbursements decreased 3% to $187.6
million as compared to $193.7 million in the same period one year
ago.
Net income for the first half of 2020 was $42.6 million, or
$0.80 per diluted share, as compared to $43.7 million, or $0.81 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 first half of 2020 was $9.7
million as compared to $5.7 million in the same period last year.
Inclusive of the tax benefit, Exponent’s consolidated tax
rate was 6.2% in the first half of 2020, as compared to 16.2% for
the same period last year.
EBITDA1 decreased to $47.8 million, or 25.5% of net revenues, as
compared to $53.4 million or 27.6% in the same period one year
ago.
In the first half of 2020, Exponent distributed $20.1 million in
dividends, repurchased $40.0 million in common stock and closed the
period with $190.2 million in cash, cash equivalents and short-term
investments.
In a separate press release today, Exponent announced a $0.19
quarterly dividend payment and reiterated its intent to continue to
pay quarterly dividends. The Company also announced that its Board
of Directors authorized an additional $45 million for future share
repurchases.
Business Overview
Exponent’s engineering and other scientific segment represented
78% of the Company’s second quarter net revenues. Net revenues in
this segment decreased 15% in the second quarter, as compared to
2019. Business restrictions associated with COVID-19 caused
project delays across multiple areas of the business. The most
substantial impact occurred to our litigation support work for the
transportation industry, with most assignments paused due to
court-related delays. At the same time, we continued to see
strength in integrity management advisory services for the
utilities sector as clients focus on power reliability, in
particular during the impending fire season in the western United
States.
Exponent’s environmental and health segment represented 22% of
the Company’s second quarter net revenues. Net revenues in this
segment decreased 2% in the second quarter, as compared to 2019.
This segment also experienced delays in projects for the
transportation and oil and gas industries. 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, including
disinfectants for the novel coronavirus.
Management Commentary and Response to
COVID-19
Exponent responded quickly and carefully to address the
unprecedented challenges created by the pandemic. We have
successfully adapted and will continue to evolve our business
development, recruiting and operational approaches, yielding
benefits both during and after this crisis. We have accelerated our
sharing of in-depth scientific and regulatory knowledge through
webinars and thought leadership pieces, which has fostered new
client relationships and projects. We have shifted all recruiting
activities online, allowing us to reach a more geographically
expansive set of candidates. The health and safety of our team
remain top priorities, and therefore we have leveraged our internal
expertise to establish protocols that allow us to safely continue
laboratory activities and resume human participant studies. Our
business continuity plan and robust infrastructure have empowered
productive remote work, and employees continue to work from home
unless they are performing laboratory testing or inspections. Our
leadership team has responded with enhanced internal communications
to encourage increased connectivity across the firm.
We are pleased that Exponent has been able to effectively
address our clients’ needs with a mostly remote workforce. The
relaxation of business restrictions in June allowed us to resume
laboratory testing, inspections, and human participant studies for
clients in non-essential industries. Field inspections of sites and
products have increased due to lifting of travel restrictions, but
are still occurring at a reduced level since many businesses are
not fully operational.
We successfully completed multiple human participant studies in
June, utilizing our enhanced health and safety protocols. Demand
for these studies continues to grow, but some are delayed because
of uncertainty surrounding COVID-19 related restrictions. We remain
optimistic about the long-term growth of this area.
We continue to receive new retentions for litigation support,
and work is ongoing for many existing matters. At the same time
trial dates continue to be delayed, removing imminent deadlines and
causing some clients – in particular the automotive industry – to
pause work. Courts have been experimenting with virtual bench
trials as well as social distancing for in-person trials, so we
expect trials will gradually increase.
We are pleased to be sharing our scientific and regulatory
knowledge on health and safety issues related to the novel
coronavirus. We have been engaged by clients to provide regulatory
support in the United States and Europe as they register their new
or existing disinfectant products. We have also been advising
clients on occupational health and safety concerns including
COVID-19 testing, contact tracing, and disinfecting as they strive
to protect their employees, customers, and students. Furthermore,
we have leveraged our breadth of disciplines from chemists and
physicists to engineers to evaluate disinfectant products from hand
sanitizers to ultraviolet light.
Business Outlook
As society continues to raise its expectations for safety,
health, sustainability and reliability, and products and processes
continue to grow in their technological complexity, Exponent will
evolve to stay ahead of the curve. These market drivers have
powered Exponent’s growth for over 50 years and have led to
increased demand for our interdisciplinary solutions despite
periods of macroeconomic turbulence.
“As a result of the current business, travel and physical
distancing restrictions caused by the COVID-19 pandemic, net
revenues for the first three weeks of the third quarter declined
approximately 5% to 8% year-over-year. While there are
opportunities for improvement, the high degree of uncertainty
surrounding how and over what timeframe each region will impose or
relax restrictions means that there could be further reduction to
our revenues in the short term. Therefore, we cannot reliably
provide financial guidance at this time,” commented Richard
Schlenker, Executive Vice President and Chief Financial
Officer.
“We have been nimble and pragmatic in our response to new market
dynamics amid the unpredictable and rapidly evolving backdrop
associated with COVID-19. I am proud of our employees for
responding with the same seriousness, intellectual rigor, and
fact-based analysis that we have employed for over 50 years. We
remain focused on three things: the health and safety of our
people, demonstrating leadership by continuing to solve our
clients’ most pressing problems, and delivering value to
shareholders,” concluded Dr. Corrigan.
Today's Conference Call Information
Exponent will discuss its financial results in more detail on a
conference call today, Thursday, July 30, 2020, starting at 4:30
p.m. Eastern Time / 1:30 p.m. Pacific Time. The audio of the
conference call is available by dialing (866) 548-4713 or (323)
794-2093. 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 9392859#.
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 COVID-19 pandemic
(including factors relating to measures implemented by governmental
authorities or by us to promote the safety of our employees,
vendors and clients; other direct and indirect impacts on our
business and the businesses of our clients, vendors and other
partners; impacts which may, among other things, adversely affect
our clients’ ability to utilize our services at the levels they
have previously; disruptions of access to our facilities or those
of our clients or third parties; and increased and potentially
significant economic uncertainty and volatility, including credit
and collectability risks and potential disruptions of capital and
credit markets), 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 July 3, 2020 and June 28, 2019 |
|
(unaudited) |
|
(in
thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Six Months Ended |
|
|
|
|
|
July
3, |
|
June
28, |
|
July
3, |
|
June
28, |
|
|
|
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
Revenues before reimbursements |
|
$ |
87,863 |
|
$ |
100,263 |
|
$ |
187,583 |
|
|
$ |
193,664 |
|
|
Reimbursements |
|
|
4,182 |
|
|
6,243 |
|
|
10,415 |
|
|
|
11,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
92,045 |
|
|
106,506 |
|
|
197,998 |
|
|
|
205,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
Compensation and related expenses |
|
|
68,137 |
|
|
61,997 |
|
|
118,122 |
|
|
|
127,090 |
|
|
Other operating expenses |
|
|
7,681 |
|
|
8,095 |
|
|
15,897 |
|
|
|
16,103 |
|
|
Reimbursable expenses |
|
|
4,182 |
|
|
6,243 |
|
|
10,415 |
|
|
|
11,873 |
|
|
General and administrative expenses |
|
|
2,925 |
|
|
5,348 |
|
|
8,456 |
|
|
|
9,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,925 |
|
|
81,683 |
|
|
152,890 |
|
|
|
164,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income |
|
|
9,120 |
|
|
24,823 |
|
|
45,108 |
|
|
|
40,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
|
|
|
|
|
|
|
|
Interest income, net |
|
|
305 |
|
|
924 |
|
|
1,180 |
|
|
|
1,979 |
|
|
Miscellaneous income (expense), net |
|
|
11,989 |
|
|
3,104 |
|
|
(819 |
) |
|
|
9,617 |
|
|
|
|
|
|
12,294 |
|
|
4,028 |
|
|
361 |
|
|
|
11,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes |
|
|
21,414 |
|
|
28,851 |
|
|
45,469 |
|
|
|
52,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
|
5,068 |
|
|
7,857 |
|
|
2,841 |
|
|
|
8,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
$ |
16,346 |
|
$ |
20,994 |
|
$ |
42,628 |
|
|
$ |
43,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.31 |
|
$ |
0.40 |
|
$ |
0.81 |
|
|
$ |
0.83 |
|
|
Diluted |
|
$ |
0.31 |
|
$ |
0.39 |
|
$ |
0.80 |
|
|
$ |
0.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per share computations: |
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
52,259 |
|
|
52,745 |
|
|
52,417 |
|
|
|
52,641 |
|
|
Diluted |
|
|
53,139 |
|
|
53,872 |
|
|
53,404 |
|
|
|
53,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPONENT,
INC. |
|
CONDENSED
CONSOLIDATED BALANCE SHEETS |
|
July 3, 2020
and January 3, 2020 |
|
(unaudited) |
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
3, |
|
January
3, |
|
|
|
|
|
|
|
|
|
|
2020 |
|
|
|
2020 |
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
$ |
155,932 |
|
|
$ |
176,436 |
|
|
|
|
Short-term investments |
|
|
|
34,220 |
|
|
|
55,165 |
|
|
|
|
Accounts receivable, net |
|
|
|
109,341 |
|
|
|
120,138 |
|
|
|
|
Prepaid expenses and other assets |
|
|
14,777 |
|
|
|
12,305 |
|
|
|
|
|
Total current assets |
|
|
|
314,270 |
|
|
|
364,044 |
|
|
|
Property, equipment and leasehold improvements, net |
|
|
60,301 |
|
|
|
61,587 |
|
|
|
Operating lease right-of-use asset |
|
|
20,124 |
|
|
|
23,003 |
|
|
|
Goodwill |
|
|
|
8,607 |
|
|
|
8,607 |
|
|
|
Other assets |
|
|
|
109,885 |
|
|
|
106,170 |
|
|
|
|
|
|
|
|
|
|
$ |
513,187 |
|
|
$ |
563,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
16,218 |
|
|
$ |
18,583 |
|
|
|
|
Accrued payroll and employee benefits |
|
|
59,295 |
|
|
|
86,723 |
|
|
|
|
Deferred revenues |
|
|
|
8,910 |
|
|
|
12,710 |
|
|
|
|
Operating lease liability |
|
|
|
5,360 |
|
|
|
5,944 |
|
|
|
|
|
Total current liabilities |
|
|
89,783 |
|
|
|
123,960 |
|
|
|
Other liabilities |
|
|
|
75,503 |
|
|
|
71,042 |
|
|
|
Operating lease liability |
|
|
|
15,334 |
|
|
|
18,158 |
|
|
|
|
|
Total liabilities |
|
|
|
180,620 |
|
|
|
213,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
66 |
|
|
|
66 |
|
|
|
|
Additional paid-in capital |
|
|
|
259,617 |
|
|
|
244,935 |
|
|
|
|
Accumulated other comprehensive loss |
|
|
(3,405 |
) |
|
|
(1,760 |
) |
|
|
|
Retained earnings |
|
|
|
|
401,956 |
|
|
|
384,668 |
|
|
|
|
Treasury stock, at cost |
|
|
|
(325,667 |
) |
|
|
(277,658 |
) |
|
|
|
|
|
Total stockholders' equity |
|
|
332,567 |
|
|
|
350,251 |
|
|
|
|
|
|
|
|
|
|
$ |
513,187 |
|
|
$ |
563,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPONENT,
INC. |
EBITDA and
EBITDAS (1) |
For the
Quarters Ended July 3, 2020 and June 28, 2019 |
(unaudited) |
(in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Six Months Ended |
|
|
|
|
|
|
|
July
3, |
|
June
28, |
|
July
3, |
|
June
28, |
|
|
|
|
|
|
|
|
2020 |
|
|
|
2019 |
|
|
|
2020 |
|
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
|
$ |
16,346 |
|
|
$ |
20,994 |
|
|
$ |
42,628 |
|
|
$ |
43,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add back (subtract): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
|
|
|
5,068 |
|
|
|
7,857 |
|
|
|
2,841 |
|
|
|
8,467 |
|
|
Interest income, net |
|
|
|
(305 |
) |
|
|
(924 |
) |
|
|
(1,180 |
) |
|
|
(1,979 |
) |
|
Depreciation and amortization |
|
|
1,701 |
|
|
|
1,642 |
|
|
|
3,487 |
|
|
|
3,232 |
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
EBITDA (1) |
|
|
|
|
22,810 |
|
|
|
29,569 |
|
|
|
47,776 |
|
|
|
53,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
3,462 |
|
|
|
4,010 |
|
|
|
9,600 |
|
|
|
9,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDAS (1) |
|
|
$ |
26,272 |
|
|
$ |
33,579 |
|
|
$ |
57,376 |
|
|
$ |
63,167 |
|
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(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. |
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Exponent (NASDAQ:EXPO)
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