Business context and reporting period
Exponent, Inc. is an engineering and scientific consulting firm. This filing covers the quarter ended April 2, 2021, compared with the three months ended April 3, 2020. The request metadata says “2020 Q1,” but the filing is for 2021 Q1.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $116.5 million | $106.0 million |
| Revenue before reimbursements | $109.6 million | $99.7 million |
| Operating income | $24.1 million | $36.0 million |
| Net income | $30.8 million | $26.3 million |
| Diluted EPS | $0.58 | $0.49 |
| Operating cash flow | $1.3 million | $(13.8) million |
Revenue grew 9.9%; net income increased 17.4%. Operating margin was approximately 20.7% of revenue, versus 34.0% a year earlier. EBITDA was $31.8 million, or 29.0% of revenue before reimbursements, compared with $25.0 million, or 25.0%, in Q1 2020. The reported income tax benefit was $0.7 million; the effective tax rate was negative 2.4%, including excess tax benefits from stock awards.
At April 2, cash and cash equivalents were $184.5 million and short-term investments were $30.0 million, totaling $214.5 million, down from $242.5 million at January 1, 2021. Current assets were $353.6 million and current liabilities $87.9 million. The balance sheet reports no borrowings or other debt. Cash used in financing was $27.0 million, including $11.9 million of dividends and $15.6 million of payroll taxes on restricted stock units; no shares were repurchased in the quarter.
Material changes and management commentary
- Engineering and Other Scientific revenue rose 10.3% to $93.6 million; Environmental and Health revenue rose 8.6% to $22.9 million. Management cited higher billing rates and billable hours, including demand in litigation, human-participant studies, batteries, chemical regulation, and food safety.
- Billable hours increased 2% to 356,000 and utilization rose to 76% from 71%. Technical full-time equivalent employees declined 3% to 906, largely reflecting the 2020 divestiture of the German subsidiary.
- Operating income fell despite revenue growth, principally because of a year-over-year swing in deferred-compensation expense. Compensation expense rose to $74.5 million, while other income improved to $6.1 million from a loss of $11.9 million; both movements largely reflected matching changes in deferred-compensation plan assets and liabilities. This market-driven item materially affected comparisons.
- General and administrative expense declined 40.8%, partly because of lower bad-debt and travel costs; other operating expense declined 6.2%. Management expects these costs to rise as hiring, investment, travel, and office activity recover.
- Management said cash, investments, and operating cash generation should meet working-capital, capital-expenditure, dividend, and other needs for at least 12 months. It expects to selectively hire and may use cash for dividends, buybacks, or complementary acquisitions. No quantified revenue or earnings guidance was provided.
Outlook, risks, and contingencies
Management described gradual resumption of paused work and continued remote operations, with laboratory work, inspections, and human-participant studies proceeding under safety protocols. It cited the COVID-19 pandemic and related restrictions, client demand and project timing, competition and pricing, employee retention, and claims and regulation as risks. The company noted that it has no backlog. One client represented 10% of Q1 2021 revenue. The company does not hedge foreign-currency exposure and stated that international growth could increase exchange-rate impacts. Management reported no material legal proceedings and no material changes to previously disclosed risk factors. A $0.20-per-share dividend was declared April 29, payable June 25, 2021.
Important facts for investors to verify
- Confirm the intended reporting period: the filing is Q1 2021, not Q1 2020.
- Assess the deferred-compensation plan’s matching asset and liability effects when comparing operating income, other income, and net income across periods.
- Monitor receivables and collections: net accounts receivable increased to $124.2 million, including $49.9 million unbilled, and the allowance rose to $4.5 million.
- Track whether utilization, hiring, billable hours, and client demand remain strong as pandemic-related restrictions ease and operating costs recover.
- Review the 10% client concentration, lack of backlog, unhedged foreign-currency exposure, and cash use for dividends and potential repurchases or acquisitions.