Exponent(US:EXPO)2023-10-27 00:53Financial Data and Key Metrics Changes - Total revenues for Q3 2023 increased by 4.8% to $133.3 million, while net revenues rose by 8.5% to $125 million compared to Q3 2022 [10] - Net income for Q3 was $24.5 million, or $0.48 per diluted share, slightly up from $24.4 million or $0.47 per diluted share in the prior year [11] - EBITDA for the quarter was $34.5 million, with a margin of 27.6%, down from 30% in the same period of 2022 [11][36] - Billable hours increased by 4.1% year-over-year to approximately 380,000 [12] - Cash and cash equivalents at the end of Q3 were $137.1 million [14] Business Line Data and Key Metrics Changes - The Environmental & Health segment represented 17% of net revenues, increasing by 13% in Q3 and 7% for the first three quarters compared to the prior year [8] - The Engineering and Other Scientific segment accounted for 83% of net revenues, increasing by 8% in Q3 and 10% for the first three quarters compared to the prior year [30] Market Data and Key Metrics Changes - Demand in the chemicals and life sciences sectors increased, while there was continued moderation in the consumer electronics sector, which created a headwind of approximately $8 million [4][11] - The company expects mid-single-digit revenue growth for Q4 2023, with similar headwinds from the consumer electronics business [15] Company Strategy and Development Direction - The company is focused on expanding capabilities and aligning resources with current and long-term demand trends through targeted recruiting and performance management [15][31] - Investments to drive organic growth and development remain a priority, with a focus on safety, health, and environmental complexities [18][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the business and the ability to drive further profitable growth despite headwinds in the consumer electronics sector [17][18] - The company anticipates that headwinds in the consumer electronics sector will begin to abate in Q1 2024 [22] Other Important Information - Other operating expenses increased by 24.7% to $11 million, primarily due to increased employee engagement [35] - Stock-based compensation expense for Q3 was $4.9 million, up from $4.6 million in the prior year [35] Q&A Session Summary Question: What is the expected run rate for billable headcount growth as the company exits Q4 into next year? - Management anticipates ending the year with a headcount around 1,025 and expects to grow throughout 2024 [19] Question: Can you elaborate on the PFAS opportunity and the composition of the project book regarding large projects? - There is increased activity around PFAS, with opportunities arising from regulatory and litigation environments [43][54] - The current portfolio consists of projects that are predominantly 2% or less, fitting into a normal project mix [56] Question: What is the outlook for demand outside the consumer electronics sector? - Demand remains strong in sectors such as transportation, life sciences, and energy, despite the headwinds in consumer electronics [41][60] Question: How does the company plan to align staffing levels with demand? - The company is focused on recruiting in areas with constrained resources while managing performance to ensure retained consultants contribute to future growth [31] Question: Can you provide insight into customer planning and visibility for 2024? - Management indicated that visibility into customer planning is limited, but they are in dialogue with clients to understand their needs [53]