Exponent, Inc.

Good day and welcome to the Exponent Second Quarter of Fiscal Year 2020 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Wendy Kukuka. Please go ahead. Thank you, Operator.

Good afternoon, ladies and gentlemen. Thank you for joining us on Exponent Second Quarter of Fiscal 2020 Financial Results Conference Call. Please note that this call will be simultaneously web-tasked on the investor relations section of the company's corporate website at www.exponent.com slash investors. This conference call is the property of Exponent and any taping or other reproduction is expressly prohibited without prior written consent. Joining me on the call today are Dr. Catherine Corrigan, President and Chief Executive Officer, and Richard Schlenker, Executive Vice President and Chief Financial Officer. Before we start, I would like to remind you that the following discussion contains forward-looking statements, including but not limited to exponents market opportunities and future financial results that involve risks and uncertainties that may cause actual results to differ materially from those discussed here. Additional information that could cause actual results to differ from forward-looking statements can be found in exponents periodic SEC filings including those factors discussed under the caption, Risk Factor, in Exponent's most recent form, 10-Q. The forward-looking statements and risks in this conference call are based on current expectations as of today, and Exponent assumes no obligation to update or revise them, whether as a result of new developments or otherwise. And I will now turn the call over to Dr. Catherine Corrigan, Chief Executive Officer. Catherine?

Thank you, Whitney, and good afternoon, everyone. Thank you for joining our call today. I hope that all of you and your loved ones are staying healthy and safe. When we last spoke at the end of April, Exponent was in its fifth week of most employees working remotely, and now we've entered our fifth month. We are pleased with the responsiveness of our employees and the adaptiveness of our company to today's uncertain environment. Clients continue to call upon Exponent to address their challenges and to evaluate their opportunities Despite the rapid change and unpredictability that the pandemic has infused into their operating plans, the fundamentals of our business remain strong, and we continue to operate in a position of financial strength. While net revenues declined 12% in the second quarter, we were able to deliver earnings per share of 31 cents, end the quarter with $190 million in cash and no debt, and reiterate our intent to continue quarterly dividends. The demand for Exponent's interdisciplinary solutions is durable as companies continue to innovate and deploy increasingly complex products and systems. At the same time, society's focus on safety, health, sustainability, and reliability requires rigorous science and data-driven analysis, which are hallmarks of Exponent's more than 50 years of service. Our agility in assembling and deploying diversely skilled teams Drawing upon more than 800 highly credentialed consultants across a vast array of disciplines has manifested itself yet again as we advise clients on a variety of issues prompted by COVID-19. Exponent has a long history and strong track record of delivering for all of our stakeholders, and we are confident in the resilience of our business and in our ability to deliver growth over the long term. Exponents engineering and other scientific segment represented 78% of the company's second quarter net revenues. Net revenues in this segment decreased 15% in the second quarter as compared to 2019. Business restrictions associated with COVID-19 caused project delays across multiple areas of this segment. The most substantial impact occurred to our litigation support work for the transportation industry, with most assignments paused due to court-related delays. At the same time, we continue to see strength in integrity management advisory services for the utilities sector as clients focus on power reliability, in particular during the impending fire season in the western United States. Exponents environmental and health segment represented 22% of the company's second quarter net revenues. Net revenues in this segment decreased 2% in the second quarter as compared to 2019. This segment also experienced delays in projects for the transportation industry as well as the oil and gas industry. Within this segment, the chemical regulation and food safety practice continued to grow in both the United States and Europe as our scientists evaluated the effects of chemicals and new products on human health and the environment including disinfectants for the novel coronavirus. Exponent responded quickly and carefully to address the unprecedented challenges created by the pandemic. We have successfully adapted and will continue to evolve our business development, recruiting and operational approaches, yielding benefits both during and after this crisis. We have accelerated our sharing of in-depth scientific and regulatory knowledge through webinars and thought leadership pieces. which has fostered new client relationships and projects. We have shifted all recruiting activities online, allowing us to reach a more geographically expansive set of candidates. The health and safety of our team remain top priorities, and therefore we have leveraged our internal expertise to establish protocols that allow us to safely continue laboratory activities and resume human participant studies. Our business continuity plan and robust infrastructure have empowered productive remote work, and employees continue to work from home unless they are performing laboratory testing or inspections. Our leadership team has responded with enhanced internal communications to encourage increased connectivity across the firm. We are pleased that Exponent has been able to effectively address clients' needs with a mostly remote workforce. The relaxation of business restrictions in June allowed us to resume laboratory testing, inspections, and human participant studies for clients in non-essential industries. Field inspections of sites and products have increased due to lifting of travel restrictions, but are still occurring at a reduced level since many businesses are not fully operational. We successfully completed multiple human participant studies in June, utilizing our enhanced health and safety protocols. Demand for these studies continues to grow, but some are delayed because of uncertainty surrounding COVID-19 related restrictions. We remain optimistic about the long-term growth of this area. We continue to receive new retentions for litigation support and work is ongoing for many existing matters. At the same time, trial dates continue to be delayed, removing imminent deadlines and causing some clients in particular the automotive industry to pause work. Courts have been experimenting with virtual bench trials as well as social distancing for in-person trials, so we expect trials will gradually increase over time. We are pleased to be sharing our scientific and regulatory knowledge on health and safety issues related to the novel coronavirus. We have been engaged by clients to provide regulatory support in the United States and Europe as they register their new or existing biocide products. We have also been advising clients on occupational health and safety concerns, including COVID-19 testing, contact tracing, and disinfecting as they strive to protect their employees, customers, and students. Furthermore, we have leveraged our breadth of disciplines from chemists and physicists to engineers to evaluate decontamination products from hand sanitizers to ultraviolet light. The world is in the midst of the most widespread and formidable health crisis in modern history, yet organizations around the globe recognize the imperative to move forward. Exponents unparalleled expertise, innovative capabilities, and geographic coverage position us as a go-to resource for answers in this complex environment. I'll now turn the call over to Rich to provide more detail on our first quarter financial results and to discuss business activity in the first three weeks of the third quarter. Rich?