Exponent, Inc. Q4 FY2025 earnings call

• During the fourth quarter, growth in proactive engagements was driven by increased demand for user research in consumer electronics, utility risk management, and life sciences regulatory compliance. Reactive services growth was from failure analysis and dispute-related engagements across industries like transportation, data center infrastructure, and energy.
• Exponent benefits from long-term market drivers such as AI and complex tech integration, which create demand for its multidisciplinary expertise. The company leverages AI within operations to enhance team effectiveness and support growth in high-stakes environments where reliability and security matter.

Exponent's Engineering and other scientific segment represented 85% of net revenues during the fourth quarter and 84% for the year 2025. Net revenues in this segment increased 7% for the fourth quarter and 4% for the full year, driven by proactive services such as risk management work for the utility industry, regulatory support services for medical device clients, and user research services for consumer electronics clients. Exponent's environmental & health segment represented 15% of net revenues during the fourth quarter and 16% of net revenues during fiscal year 2025. Revenues before reimbursements in this segment decreased 5% for the fourth quarter and were approximately flat for the full year, with the decline in the fourth quarter primarily due to having 1 less week compared to 2024.

• Net revenues for Q1 and full-year 2026 are expected to grow in the high single digits.
• Q1 2026 EBITDA margin is expected to be 27.5% to 28.5% of net revenues, and FY2026 EBITDA margin is expected to be 27.6% to 28.1% of net revenues.
• Average technical full-time equivalent employees are expected to increase ~4% in Q1 2026 and 4% to 5% for FY2026.
• Stock-based compensation, other operating expenses, G&A expenses, interest income, tax rate, and capital expenditures have specific guidance ranges for 2026.

Q: Andrew Nicholas asked about consumer electronics business performance and near-term outlook.

A: Catherine Corrigan noted growth in user research for consumer electronics related to health and novel devices, and Richard Schlenker discussed positive trends and guidance.

Q: Tomo Sano inquired about 2026 characterization and drivers.

A: Catherine Corrigan highlighted growth in consumer electronics, energy, chemical, and transportation sectors as key drivers.

Q: Tobey Sommer asked about net headcount growth.

A: Richard Schlenker expected net headcount growth in the range of 40-50, with growth in transportation, energy, battery storage, automation, and chemicals.

Q: Joshua Chan asked about clients using AI.

A: Catherine Corrigan stated clients are incorporating AI into operations, seeking Exponent's help for benchmarking and reality checking.

Q: Joshua Chan inquired about free cash flow in 2026.

A: Richard Schlenker expected improvement in free cash flow conversion due to potential DSO reduction.