Exponent Q1 Earnings Call Highlights

Key Points

• Q1 growth was driven by AI-related work: Exponent said demand for user research supporting AI-enabled consumer electronics, plus utility risk-management and increased dispute/failure analysis across energy, construction and medical devices, fueled its double-digit revenue and earnings growth.
• Solid financials and shareholder returns: Total revenue rose 14% to $166.3M (net revenues up 10% to $151.8M), net income increased 11% to $29.6M with EPS of $0.59, EBITDA grew 15% to $43.1M (28.4% margin), and the company repurchased $79M of stock and paid $16.6M in dividends while the board approved an additional $50M buyback.
• Outlook and leadership update: Exponent maintained guidance for high single‑digit net revenue growth and ~27.6%–28.1% EBITDA margin for FY26, and announced John Pye as incoming president and Eric Anderson as incoming CFO effective May 1, with Rich Schlenker remaining as EVP.

Exponent NASDAQ: EXPO reported double-digit growth in first-quarter fiscal 2026 net revenues and earnings, pointing to rising demand for its multidisciplinary consulting work tied to artificial intelligence-enabled products, utility risk management, and a mix of dispute-related and failure analysis engagements across several end markets.

First-quarter performance driven by AI-related consumer electronics and utility risk work

President and CEO Catherine Corrigan said the company’s growth was “driven by user research studies for consumer electronics clients who are integrating artificial intelligence into their devices,” adding that Exponent is seeing “diversification of this work” across both its client base and the products and technologies it supports.

Corrigan also cited increased demand for “risk management work for utility clients evaluating asset performance under extreme weather conditions.” She said reactive work contributed as well, including “increased dispute-related and failure analysis demand across construction projects, energy facilities, and medical devices,” with increased activity from both domestic and international clients tied to complex construction disputes.

Corrigan framed the opportunity set around what she described as the growing integration of AI and other advanced technologies into “performance-critical and physical systems,” where clients are seeking independent help to evaluate failure modes, usability, reliability, and risk. She said the work spans use cases ranging from automated vehicles to automated insulin delivery systems and utility systems applying AI to anticipate asset risk and help prevent wildfires.

Revenue rises 14% as margins expand

Executive Vice President and CFO Rich Schlenker said total revenues increased 14% year over year to $166.3 million, while revenues before reimbursements (net revenues) rose 10% to $151.8 million. Net income increased 11% to $29.6 million, and earnings per diluted share increased 13% to $0.59.

EBITDA increased 15% to $43.1 million, representing 28.4% of net revenues, compared with 27.3% a year earlier. Schlenker said billable hours increased 6% to about 399,000, while average technical full-time equivalent employees rose 5% to 1,013, which he attributed to recruiting and retention efforts. Utilization was 76%, up from 75% a year earlier, and realized rates rose about 4% year over year.

Schlenker also discussed the quarter’s tax impacts. He said Exponent recorded a negative tax impact from share-based awards of $900,000, compared with $500,000 in the year-ago quarter, which he attributed to changes in the company’s stock price between grant and release dates for restricted stock units. The consolidated tax rate was 30.2% in the quarter, compared with 29.4% in the prior-year period.

Segment results and expense trends

Exponent’s Engineering and Other Scientific segment accounted for 85% of net revenues and grew 12% year over year, with Schlenker citing user research in consumer electronics, utility risk management work, and reactive engagements in the energy and life sciences sectors as key contributors.

The Environmental and Health segment represented 15% of net revenues and grew 2%, driven primarily by regulatory consulting in the chemicals industry, according to Schlenker.

On costs, Schlenker said compensation expense (adjusted for gains and losses and deferred compensation) increased 9%. He noted a $1.1 million loss in deferred compensation compared with a $9.3 million loss a year earlier, emphasizing that deferred compensation gains and losses are offset in miscellaneous income and do not affect bottom-line results. Stock-based compensation expense rose to $9.1 million from $8.2 million.

Other operating expenses increased 6% to $12.8 million due to investments in corporate infrastructure, including $2.5 million of depreciation and amortization. G&A expenses rose 24% to $6.2 million, primarily from increased travel and meals associated with business development, recruiting, and people development activities. Interest income declined to $1.7 million due to lower cash balances and lower interest rates.

Capital returns and buyback authorization increase

Schlenker said Exponent distributed $16.6 million to shareholders through dividends and repurchased $79 million of common stock at an average price of $68.09 during the quarter. He also said the board approved a $50 million increase to the company’s existing repurchase program, in addition to $17.7 million available for repurchases as of April 3, 2026.

In response to an analyst question about the pace of repurchases, Schlenker said the company has historically been willing to be “more aggressive on pullbacks” and pointed to $177 million of repurchases over the past four quarters, which he said represented almost 5% of shares. He said management’s view is supported by confidence in long-term profitability and cash flow.

Outlook maintained; leadership transitions take effect May 1

For the second quarter, Schlenker said Exponent expects net revenues to grow in the “high single digits” year over year and EBITDA margin to be 27% to 27.8% of net revenues. For fiscal 2026, the company maintained its guidance for high single-digit net revenue growth and EBITDA margin of 27.6% to 28.1%.

Additional second-quarter and full-year expectations included:

• Average technical FTEs: up about 5% year over year in 2Q; up 4% to 5% for the full year
• Utilization: 72% to 73% in 2Q; 72.5% to 73% for the full year
• Realized rate increases: 3% to 3.5% for 2Q and full year
• Stock-based compensation: $6.5 million to $6.7 million in 2Q; $27.9 million to $28.4 million for the full year
• Other operating expenses: $12.8 million to $13.3 million in 2Q; $53 million to $53.5 million for the full year
• G&A expenses: $7.2 million to $7.7 million in 2Q; $28.5 million to $29.5 million for the full year
• Interest income: $700,000 to $900,000 per quarter during 2026
• Tax rate: approximately 28% in 2Q; 28.5% for the full year
• Capital expenditures: $12 million to $14 million for the full year

The call also marked a leadership transition. Corrigan introduced John Pye as incoming president and Eric Anderson as incoming CFO, both effective May 1. Corrigan said Pye, a 25-year veteran, has played “a central role in advancing our capabilities and innovation agenda,” while Anderson brings “rigorous financial discipline with a deep understanding of our strategy and operations.” She also thanked Schlenker for his years as CFO, noting he will remain executive vice president and stay engaged with investors.

During the Q&A, Corrigan and Pye emphasized opportunities tied to “physical AI,” including robotics and automated vehicles, and Corrigan said energy demand tied to data centers is influencing both disputes and proactive risk work. She also highlighted chemicals work connected to increasingly complex regulatory frameworks and PFAS-related activity, including work involving substitutions and dispute-related matters.

Schlenker addressed recruiting competitiveness, saying the market for top technical talent remains intense, but he said Exponent’s offer acceptance rate is “as high as it’s ever been” and that the firm continues to hire roughly 150 to 200 new people per year.

About Exponent NASDAQ: EXPO

Exponent, Inc NASDAQ: EXPO is an engineering and scientific consulting firm that offers multidisciplinary analysis and advisory services to clients across a range of industries. The company's expertise spans mechanical, materials and corrosion engineering, civil and structural engineering, electrical engineering, industrial hygiene, toxicology and health sciences, and failure analysis. Exponent provides support for product design, performance evaluation, litigation consulting, and regulatory compliance, helping manufacturers, insurers, law firms and government agencies address complex technical challenges.

Founded in 1967 in Menlo Park, California, Exponent has grown from a small failure-analysis laboratory into a global consulting practice.

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