Exponent, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and first nine months ended October 1, 2021, compared with periods ended October 2, 2020. The filing itself is for 2021; the request metadata labels the period 2020 Q3. Exponent is an engineering and scientific consulting firm.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $116.4m (+18.0%) | $98.7m | $352.8m (+18.9%) | $296.7m |
| Revenue before reimbursements | $108.5m (+16%) | $93.5m | $330.5m (+17.6%) | $281.1m |
| Operating income | $32.1m (+57.4%) | $20.4m | $85.5m (+30.6%) | $65.5m |
| Net income | $24.6m (+35.9%) | $18.1m | $80.8m (+33.1%) | $60.7m |
| Diluted EPS | $0.46 | $0.34 | $1.52 | $1.14 |
| Operating cash flow | Not stated for quarter | $70.4m | $62.4m |
Q3 operating margin was 27.6% of reported revenue (versus 20.7%); net margin was 21.1% (versus 18.3%). Compensation and related expenses rose 2.8% in Q3, slower than revenue growth, and were 55.1% of revenue versus 63.3%. Nine-month EBITDA was $102.1m, or 30.9% of revenue before reimbursements, compared with $73.8m and 26.3%.
Liquidity, cash flow, and capital
At October 1, cash and cash equivalents were $229.8m and short-term investments were $25.0m, totaling $254.8m; total current assets were $417.6m against current liabilities of $126.4m. The balance sheet reports no borrowings or other debt. Total liabilities were $233.3m, including deferred compensation and lease liabilities. Cash increased $32.3m from fiscal year-end.
Nine-month investing cash flow was positive $14.6m, including $20.0m net maturities of short-term investments; financing cash outflow was $52.8m, including $32.8m of dividends, $15.7m of payroll taxes on restricted stock units, and $7.0m of share repurchases. Management said cash and operating cash generation should cover working capital, capital expenditures, commitments, repurchases, dividends, and other needs for at least 12 months.
Changes and management commentary
- Engineering and Other Scientific revenue increased 22.6% in Q3 and 22.3% year to date, driven by higher billable hours and billing rates. Environmental and Health revenue was down 0.7% in Q3 but up 5.8% year to date.
- Q3 billable hours rose 13% overall and utilization increased to 76% from 66%; technical headcount declined 2% to 883. Management cited stronger litigation activity, proactive data studies, utility climate-risk work, chemicals, energy storage, automotive, and consumer products projects.
- Reimbursable expenses rose as project travel and other activity resumed with easing COVID-19 restrictions. Q3 general and administrative expense increased 48%, partly reflecting a $250,000 scholarship contribution and higher travel, bad debt, and relocation costs.
- Q3 other income fell to $0.3m from $4.2m, primarily reflecting changes in deferred-compensation plan asset values and lower interest income. For the first nine months, other income rose to $11.6m, largely due to plan asset gains. Changes in plan assets are substantially offset by corresponding compensation expense or benefit.
- The nine-month effective tax rate was 16.8%, versus 13.4%; excluding excess tax benefits on stock-based awards, management reported rates of 27.0% and 27.2%, respectively.
Outlook, risks, and unusual items
No quantitative revenue or earnings guidance was provided. Management expects compensation costs to rise with selective hiring and market-based pay adjustments; operating and general and administrative expenses may also increase as hiring, infrastructure investment, office transitions, and travel resume. The company expects to continue quarterly dividends subject to board approval; a $0.20-per-share dividend was declared after quarter-end for payment December 17, 2021.
Risks discussed include COVID-19 impacts, economic and client-demand uncertainty, engagement timing, competition and pricing, recruiting and retention, and litigation or regulatory exposure. Exponent disclosed one client represented 15% of Q3 revenue and 13% of nine-month revenue. It reported no material legal proceedings and said ordinary-course claims are not expected to materially affect financial condition, results, or liquidity, while acknowledging litigation uncertainty. Foreign currency movements and interest-rate changes are additional exposures; the company does not hedge foreign currency risk. No material changes to previously disclosed risk factors were reported.
Investor facts to verify
- Confirm the period: this filing reports results through October 1, 2021, notwithstanding the request metadata’s 2020 Q3 label.
- Assess whether Q3 revenue growth and utilization gains can persist as hiring and compensation costs increase.
- Track the concentrated client’s revenue share, receivable growth, and collection trends; net accounts receivable rose to $144.0m from $111.6m at fiscal year-end.
- Separate operating performance from deferred-compensation investment movements and stock-based compensation tax benefits when evaluating earnings.
- Monitor the company’s dividend and repurchase activity alongside cash generation and its stated liquidity outlook.