Exponent, Inc. Q1 FY2026 earnings call

Exponent delivered double-digit revenue growth in Q1 2026. Growth was driven by user research for consumer electronics integrating AI, risk management for utilities evaluating asset performance under extreme weather, and reactive engagements in construction, energy, and medical devices. Trends in energy, infrastructure risk, and tech innovation support demand for Exponent's expertise. Integration of AI and advanced tech increases reliance on Exponent. Billable hours increased 6%, average technical FTEs up 5%, utilization 76%, realized rate increase ~4%. Compensation expense up 9%, stock-based comp $9.1M, other operating expenses up 6%, G&A expenses up 24%.

Exponent's engineering and other scientific segment represented 85% of revenues before reimbursements in the first quarter, with revenues before reimbursements in this segment increasing 12% driven by user research studies in consumer electronics, risk management in the utility sector, and reactive engagements in energy and life science sectors. The environmental and health segment represented 15% of revenues before reimbursements, with revenues before reimbursements in this segment increasing 2% primarily due to regulatory consulting in the chemicals industry.

Expect revenues before reimbursements to grow in the high single digits and EBITDA to be 27-28.1% of revenues before reimbursements for FY2026. Average technical FTEs expected to increase ~5% in Q2 2026 and 4-5% full year. Utilization expected 72-73% Q2 2026 and 72.5-73% full year. Realized rate increase 3-3.5% full year. Stock-based comp $6.5-6.7M Q2 2026 and $27.9-28.4M full year. Other operating expenses $12.8-13.3M Q2 2026 and $53-53.5M full year. G&A expenses $7.2-7.7M Q2 2026 and $28.5-29.5M full year. Interest income $700k-900k per quarter, miscellaneous income ~$300k per quarter. Tax rate ~28% Q2 2026 and 28.5% full year. Capital expenditures $12-14M full year.

The discussion contains forward-looking statements and risks that may cause actual results to differ materially from those discussed. Additional information on risks can be found in Exponent's periodic SEC filings, including risk factors in the most recent Form 10-K.

Q: About macro trends like AI, innovation, energy demand impacting projects, client base, competitive positioning and changes in required expertise in Q1 and outlook for Q2 and after.

A: Energy sector sees evolution across technologies, data centers have cooling, corrosion, metallurgy issues. Robotics has physical AI applied, pulling in multiple disciplines.

Q: On consumer electronics diversification, broadening of demand across client types and products.

A: Health-related products, novel form factors for AI delivery, hardware associated with AI like data center stack.

Q: On talent environment, attractiveness of talent given AI focus and share-based comp.

A: Talent market competitive, Exponent's multidisciplinary approach helps, acceptance rate on offers high, bringing in 150-200 new people a year.

Q: On durability of consumer market projects and repurchase decision.

A: Gradual step up in activity, momentum continuing. Repurchase $79M in Q1, board authorized $50M increase in stock repurchase program.

Q: On portfolio of larger projects and impact of AI on scope.

A: Portfolio diverse, AI increases complexity in automotive product liability, intellectual property matters.

Q: On chemicals industry demand and energy/utility sector outlook.

A: Chemicals have regulatory and dispute-related growth, energy/utility has drive for more energy, data center challenges, nuclear side driving inquiries.