Exponent, Inc.

Good day and welcome to the Exponent Third Quarter Fiscal Year 2021 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Joni Constantelos. Please go ahead.

Thank you, Operator. Good afternoon, ladies and gentlemen. Thank you for joining us on Exponent's Third Quarter of Fiscal Year 2021 Financial Results Conference Call. Please note that this call will be simultaneously webcast on the investor relations section of the company's corporate website at www.exponent.com backslash 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. Katherine Corrigan, President and Chief Executive Officer, and Rich Lenker, 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 10Q. 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 now I will turn the call over to Dr. Katherine Corrigan, Chief Executive Officer. Katherine?

Thank you, Joni, and thank you, everyone, for joining us today. I will start off by reviewing our third quarter 2021 business performance Rich will then provide a more detailed review of our financial results and outlook, and we will then open the call for questions. In the third quarter of 2021, we continued to deliver exceptional results. For the quarter, net revenues grew 16%, while EBITDA margin increased over 350 basis points from the prior year period. We saw robust demand across our diverse business lines, in large part driven by our differentiated value proposition, which brings together high-quality data analytics with unrivaled subject matter expertise. Importantly, while momentum in litigation continued, the proactive side of the business continued to drive growth through a significant increase in user and machine learning data studies, outpacing 2019 levels. Additionally, the velocity of new starts over the last several months and the caliber of that talent underscores our ability to attract the best and the brightest talent to our team. Turning to our engagements in more detail, our momentum continued into the third quarter as we won new assignments while reengaging projects on the reactive side of the business. As we highlighted last quarter, our litigation work has been in a mode of recovery, hovering near 2019 levels. As the throughput of litigation in our United States courts continues to accelerate, we will be positioned to capture the stickiness and inertia around the backlog of trials making their way through the system. Globally, delays in international arbitrations have the potential to recover with eased COVID restrictions facilitating more in-person meetings. Exponent is well positioned to capture these growth tailwinds while also leveraging expansion into new end markets, such as pharmaceutical and software litigation, and increasing our brand recognition in the international arbitration arena. Within our proactive business, we are seeing a strong increase in user studies spanning across various end markets, particularly as it relates to artificial intelligence and machine learning for wearables and other devices. This increase is driven by rising demand as well as the accessibility of human participants and the ability to conduct on-site work as COVID restrictions eased over the year. Overall, our proactive engagements remained robust and diverse, fulfilling complex customer requirements related to user experience as well as product optimization and performance while leveraging data analytics to further mitigate risk for our clients. Our traction across our multidisciplinary offering continues to demonstrate the strength of our long-term strategy and our commitment to providing customers with the tools and analysis needed to drive optimal decision-making. Utilization in the third quarter saw improvement year over year, supported by strong demand for human participant studies, increased litigation work, and lower headcount, which drove improved profitability. However, as we have said over the last few quarters, we do expect utilization to normalize somewhat in the fourth quarter of 2021. As human participant studies moderate, headcount grows, and we see typical seasonality. Recruiting a world-class team remains a top priority for us, and we have accelerated our efforts during the second and third quarters of 2021. While the market for engineering and scientific talent remains competitive, and voluntary turnover has increased relative to last year, we are seeing exceptional candidates and adding depth and experience to our already world-class team. Turning to our segments, exponents engineering and other scientific segments represented 83% of our net revenues in the third quarter, increasing 20% year over year. Our growth was driven by strong demand for exponent services across a broad range of industries and use cases. In addition to the steady increase in litigation support and human participant studies for the consumer product segment, our work around wearable technologies and asset integrity and risk management for utilities was a core driver of growth over the period. On the automotive side, we continue to see strong reactive based demand for our unrivaled and state of the art testing and analysis capabilities for advanced driver assistance systems. On the proactive side of automotive, we continue to engage clients in implementing safety frameworks in the automated, connected, electric, and shared vehicle space, while also gaining traction on battery work for electric vehicles and energy storage systems. Exponent's environmental and health segment represented 17% of the company's net revenues in the third quarter. Net revenues in this segment were largely flat compared to the prior year period. The pharmaceutical industry remains a significant opportunity for Exponent as we leverage our multidisciplinary approach and data landscape across the full product lifecycle, from pharmacoepidemiology and real-world evidence to health economics and outcomes research and market access. As mentioned last quarter, our focused efforts in the pharmaceutical industry continue to materialize with an emphasis on recruitment and business development initiatives supporting new client engagements. Overall, we are very encouraged by the influx of new engagements and key hires across the business. We are already seeing our accelerated recruitment efforts materialize with a strong pipeline of high-quality talent, positioning Exponent for a record year of hiring to close out the year. As we move through the remainder of fiscal year 2021, we remain confident that our strong reputation, multidisciplinary capabilities, industry-leading expertise and market-driven durability will propel exponents forward towards sustained growth and increased scale. I'll now turn the call over to Rich to provide more detail on our third quarter 2021 results, as well as discuss our outlook for the fourth quarter and the full year 2021.