Exponent(US:EXPO)2022-04-30 16:58Financial Data and Key Metrics Changes - Total revenues increased by 10.3% to $128.5 million, while net revenues rose by 7.6% to $117.9 million compared to the same period in 2021 [15] - Net income decreased to $29.6 million or $0.56 per diluted share, down from $30.8 million or $0.58 per diluted share in the prior year [16] - EBITDA increased by 8.6% to $34.5 million, with a margin of 29.2% of net revenues compared to 29.0% in the first quarter of 2021 [17] - Billable hours increased by 4.8% year-over-year to 374,000, and utilization rose to 76.5% from 75.7% in the same quarter of 2021 [17] Business Line Data and Key Metrics Changes - The engineering and other scientific segment represented 81% of net revenues, increasing by 9% year-over-year, driven by strong demand in utilities, consumer electronics, and life sciences [13] - The environmental and health segment accounted for 19% of net revenues, with a 4% increase compared to the prior year, primarily due to work evaluating the impacts of chemicals on the environment [13] Market Data and Key Metrics Changes - Growth in the first quarter was driven by sectors such as consumer electronics, utilities, chemicals, and life sciences, with increased demand for product design optimization and risk-mitigating data analytics [6][7] - The company noted a rebound in litigation-related work and increased activity related to product recalls, particularly in the life sciences sector [7][11] Company Strategy and Development Direction - The company aims to capitalize on macro trends emphasizing safety, health, and environmental issues, positioning itself to help clients build safer and more sustainable products [8][11] - Exponent is focused on expanding its multidisciplinary approach in new verticals, particularly in life sciences and pharmaceuticals, to maintain differentiation in a competitive market [32][44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to attract and retain talent despite a competitive job market, with a robust hiring pipeline [12] - The outlook for the second quarter anticipates mid-single-digit revenue growth before reimbursements, with EBITDA margins expected to decrease by 250 to 325 basis points compared to the prior year [21][22] Other Important Information - The company distributed $12.5 million to shareholders through dividends and repurchased $48.6 million of common stock at an average price of $87.87 [20] - The Shanghai office represents 2% to 2.5% of net revenues, with some work being done remotely during the COVID-19 lockdown [21][34] Q&A Session Summary Question: Competitiveness in New Markets - Management noted that while the pharma consulting space is crowded, Exponent's multidisciplinary approach differentiates it from competitors [32] Question: Talent Market in New Verticals - The talent market in life sciences is equally competitive, but Exponent's unique offerings attract top talent [33] Question: Impact of Shanghai Lockdown on Revenues - The Shanghai office is not at zero revenue during the lockdown, as staff can work from home, but the work is laboratory-intensive [34] Question: Margin Performance - Margins performed better than expected due to higher utilization and lower-than-expected expenses [37] Question: Litigation Work Recovery - Litigation activity has exceeded pre-COVID levels, with strong performance across various markets [40] Question: Revenue Contribution from China - The Shanghai and Hong Kong offices contribute approximately 3.5% to 4% of total revenues [42] Question: Long-term Success and Competition - Management emphasized the importance of professional development and integration across disciplines as key factors in Exponent's long-term success [44] Question: Areas of Sunset or De-emphasis - The company has evolved its portfolio over time, sunsetting certain areas while expanding into new verticals like pharmaceuticals [46][48]